Huffington Post - Amitai Etzioni: Cap Executive Pay
This opinion piece reviews two competing theories about how CEOs [I don't see why this shouldn't apply to all 'executives'] should be compensated. The conflict is cast as between the theories of Michael Jensen (Harvard) and Robert Frank (Cornell). Jensen advocates even higher executive pay for success and stiff penalties for failure. (Most corporations ignore the second part.) Frank advocates a cap on total compensation, arguing that the psycho-economic theory 'relative deprivation' would predict an across-the-board limit would be just as good for CEOs. The idea is that executive pay is largely a status symbol, most executives having no time to spend their money anyway. If the status was limited to a certain 'highest level', then CEOs would be just as satisfied with their pay. (Compare European CEOs, whose pay is much lower, but are just as satisfied because their peers' pay is also around the same amount.)
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