Summary and reponse for "Lake Wobegon" effect: When all CEOs are above average — pay wise

Summary  for "Lake Wobegon" effect: When all CEOs are above average — pay wise by Peter Whoriskey

http://seattletimes.nwsource.com/html/businesstechnology/2016456437_ceopay16.html

 According to the article “Lake Wobegon effect: When all CEOs are above average — pay wise.” By Peter Whoriskey on Seattle Time on October 15, 2011, majority of the CEO of big company are being overpay, whether they do a good job or not. The board of directors argued that to keep talent CEO to stay and work for the company. The company did not public their CEOs’ salary until late 2006, the Securities and Exchange Commission requested company to reveal how they determine the salary of the CEO. It showed that the salary of the CEO depend on his or her legal status more than his ability. Most of the CEOs received stock compensate_ giving CEO some percentage of the company stock_ as a form to motivate them to work harder for the company. The relationship between CEO and board of director usually more than just acquaintance, in fact it is not uncommon for the CEO and board director to be friend or business partner. The story have not confirmed or denied yet as the company refused to interview and talk about the matter, although there is some complaint from minority of the shareholder.

Response : I personally think the article is a little bit bias and unreliable. The author stand as a socialist not economist, the CEO with better legal status have higher opportunity cost. Therefore, there is nothing wrong for them to have a higher pay. The author only has one-side story, if he did not do a good job how the board director hire him, so if they want to keep him that mean he did a good job for the company. The personal relationship may affect somehow but even former CEO of apple got fire by his own company, this incident showed that relationship is not that important for the CEO to keep his post but his performance.