Should CEOs Set Their Own Salaries?
The editorial "Executive Pay and Civic Culture," Jan. 14, states that "from an economic standpoint, gripes about executive pay may be unmerited. The market in CEO compensation works imperfectly, but it works."Skip to next paragraph
Subscribe Today to the Monitor
The author is mistaken: the market in CEO compensation is an example of market failure. The buyer of CEO sevices, the corporation's board of directors, has neither the means nor the incentive to limit the salaries paid to CEOs. Especially since the board is often chaired by the CEO.
The stockholders should be required to approve the compensation of the CEO. If the stockholders could vote on whether to approve or disapprove the pay level for the CEO, then you could say that the market for CEOs works. As things stand now, the CEO has personal control over the pay level he or she receives. Theodore A. Wohlfarth, St. Louis
Letters are welcome. Only a selection can be published, subject to condensation, and none acknowledged. Please address them to "Readers Write," One Norway St., Boston, MA 02115.