June 12, 2013, Wednesday
Research Finding :
Good News Boosts the CEO's Pay; Bad News Has No Effect !
Research outcome :
If shareholders think a CEO has done something good to boost profits, they reward the boss with a pay increase amounting to 48.9% (on average) of the perceived contribution to higher profits.
But when the CEO is seen as causing a profit decline, there's a zero effect on his or her pay ! According to a study of more than 4,500 chief executives in USA.
Trend analysis :
This "downward rigidity" of CEO pay is pervasive in companies, whether their governance is good or bad.
CEOs are in effect insured against bad news about their abilities , researchers conclude
Research Courtesy : Lucian A. Taylor of The Wharton School
( This is how - The Rich get richer & the ground level employees get pink slips, pay cuts , austerity measures & such ! )
SOURCE: CEO wage dynamics: Estimates from a learning model
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