A provocative title, no? Well, Todd Henderson's a provocative guy. On Wednsday, May 9, 2007, he delivered the talk on "CEOs are Underpaid." As he said, he may not have convinced the audience that CEOs are underpaid, but he was pretty convincing in explaining that they seem to be efficiently paid and not overpaid. You're going to have to listen to hear for yourself. The blurb for the talk is after the jump.
Conventional wisdom suggests that CEOs make too much money and that agency costs explain the excessive amounts and inefficient forms of compensation. Consider two famous people who share this view: New York Times pundit and corporate critic Gretchen Morgenson wrote: “Executive compensation is the cancer of corporate America. CEOs have too much power and it has been directed at their own enrichment”; her view is shared, more or less, by Earth’s second richest man, Warren Buffett ($52 billion +/-), who calls current pay practices “[i]rrational and excessive.” These views are shared by most academics. Harvard law professor Lucian Bebchuk recently argued that the way to rein in pay is by empowering shareholders, that is, by reducing agency costs.
As usual, conventional wisdom is wrong. Drawing on his research and that of several other Chicagoans across the Midway, Professor Henderson will argue that, if anything, CEOs are, on average, underpaid; and reducing agency costs is unlikely to fundamentally alter the amounts or ways in which CEOs are compensated.