Higher CEO Pay Leads to Lower Stock Returns

Discussion in 'Too Hot for Swamp Gas' started by mdgator05, Jun 20, 2014.

  1. oaklandroadie
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    oaklandroadie Well-Known Member

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    If it doesn't self correct, it is easy to admit the free market is often corrupted by flawed humans. Actually won't be surprising,

    Too bad progressives can't admit that their beloved government also fails due to the same flawed humans. Will you be able to restrain yourself from advocating that the government place mandates, regulations, and restrictions upon CEO compensation to fail from an opposite angle.
  2. oaklandroadie
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    oaklandroadie Well-Known Member

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    Thanks for these uninformed replies so everyone can constantly be reminded how little you actually understand.
    • Agree Agree x 1
  3. mdgator05
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    mdgator05 Premium Member

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    Much of Conservative economics are built on theories which themselves are built on rational actors. This would suggest that the markets should have already done this. Based on those theories, which again form the basis of most conservative thought and policy, the markets should have already adjusted. I tend to fall more into a bounded rationality camp, which would explain how the markets are supposed to react after this publication rather than before the publication of this research. However, it largely discredits your initial post.
  4. mdgator05
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    mdgator05 Premium Member

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    The issue is that this research shows that highly paid CEOs are not having a positive effect. And they are not owned by the public, they are owned by shareholders, who are members of the public.

    The issue this thread exposes is that higher pay is actually a predictor of being a subpar CEO in terms of maximizing shareholder value. And no I don't have outrage over people making lots of money. I have issues with people that destroy value making huge amounts of money because of the intermingling of boards, who have largely overvalued their own position.
  5. mdgator05
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    mdgator05 Premium Member

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    I already have, so nice try drawing a false comparison. However, it is easy to blame "flawed humans." It is far more difficult (but far more important) to examine structural flaws that might lead to the issues demonstrated in this thread.
  6. OklahomaGator
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    OklahomaGator VIP Member

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    A couple of issues I see:

    1.). Looking at a ceo's pay for one year could be entirely misleading in that many projects don't get returns in just one year;
    2.) size of the company makes it hard for huge companies to have similar returns of smaller companies.
  7. mdgator05
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    mdgator05 Premium Member

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    1. They looked over three years.
    2. Firm size is included as a co-variate.

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