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The labourer is worthy of his hire

Alex Scott

Faculty Blog

One of the interesting outcomes of studying economics is that you can come to conclusions that fly in the face of conventional wisdom. This often arouses emotional responses from individuals who do not like the rather coldly rational economist’s approach. A case in point is the article Bosses are not Overpaid, in which Steven Kaplan produces evidence that US bosses are paid the going rate for what they do. There is a widespread feeling that CEOs are overpaid and that it is time that the ‘fat cats’ are brought under control. The ‘shareholder spring’ has resulted in many companies reviewing their remuneration policies. But what if corporate critics are wrong and it would do more harm than good to regulate CEOs’ pay?