Tuesday, December 19, 2006

Firms cook the books to set executive pay

From the St. Petersburg Times Opinion: Firms cook the books to set executive pay:
"Grasso was a poster child for the abuse. His $140-million compensation package was rationalized, in part, by comparing his job to those at companies with median revenues 25 times the size of the exchange, assets 125 times and employee bases 30 times the size.

Grasso was hardly alone. Executives have learned that the path to personal riches is paved by 'peer groups' that include big and profitable companies"
This is not real news. At least since 2000, the idea has been documented in academic literature. For instance, see Bizjak, Lemmon, and Naveen. The NY Times article that is referenced is here.

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