Brett McDonnell, Two Goals for Executive Compensation Reform

Brett McDonnell of Minnesota Law School has posted Two Goals for Executive Compensation Reform on SSRN. The essay puzzles through divergent issues underlying concerns with high levels of executive compensation at US corporations. 

McDonnell notes that most corporate scholars view executive compensation as purely a governance concern, while politicians express concerns with how high levels of executive compenesation contribute to income inequality within society.  McDonnell reviews the various perspectives on the issue and concludes that corporate scholars are wrong to ignore concerns with income inequality.  He concludes that effects of corporate governance rules and practices on income inequality deserve more discussion within the corporate literature.   Here is the abstract:

Most corporate law scholars who suggest reforming executive compensation worry about corporate governance problems that arise out of poor compensation design. Most politicians who suggest reforming executive compensation seem as or more worried about growing economic inequality. This essay briefly considers two arguments justifying legal scholars in ignoring the concern with inequality. The first argument says that we should address inequality concerns only through tax and transfer policy. This essay responds that politics may dictate sometimes trying to reduce inequality through other means as well. The second argument claims that high pay for the top executives of public corporations has played only a small role in the growth of economic inequality. This essay finds this argument much more persuasive, but suggests reasons why further empirical investigation may still show that reforming executive compensation may be a modestly important part of a broader package of reforms to reduce inequality.

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One Response to Brett McDonnell, Two Goals for Executive Compensation Reform

  1. Shawn Hyde says:

    I don’t think it should be governed as long as the companies practice is ethical.

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