Is the Sky the Limit? Fair Executive Pay as Performance Rises

• In Event: 367 - Regular Session. Affluence/Wealth

Abstract

This study juxtaposes two possible explanations for the discontent that many Americans have shown regarding extremely high Chief Executive Officer (CEO) pay in the aftermath of the Great Recession of 2008. The first of these accounts is that such high pay is understood by the public as being achieved not through good performance but through rent-extraction beyond one`s economic worth. The second account, in contrast, posits that many people find extremely high income inequality morally wrong and therefore even if high earners were understood as performing well; such high pay would still be contested. Using data from a national survey experiment (N = 989) uniquely designed to test these two propositions and conducted in partnership with the YouGov Survey Company, I evaluate the shape of the fair pay function for a CEO whose performance incrementally improves. The findings show that the respondents do not hesitate to increase fair pay proportionally with the CEO`s performance up to extremely high pay levels. The fair pay function increases linearly with performance and this indicates support for the rent-extraction account.

Author

• Beste Esra Burak Ho, Lingnan University