Business, Management and Accounting
4 years ago

CEO wealth tied to shareholder wealth, but ownership declining over time.

Performance pay and top-management incentives
Michael C. Jensen, Kevin J. Murphy

Paper Summary

The study found that CEO wealth changes by 3.25forevery3.25 for every 3.25forevery1,000 change in shareholder wealth. Most CEOs own very little stock in their companies, despite stock ownership being a big incentive. CEO pay has decreased since the 1930s, possibly due to political pressures limiting pay-performance sensitivity.

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