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Saturday
Jan172009

Two hypotheses for why US CEO pay is so high

Average CEO compensation in the US is more than twice the average of other advanced countries and is 56% higher than second place Switzerland.

Also, the ratio of CEO compensation to the compensation of manufacturing production workers, at 39:1, is almost twice the average of the other advanced countries.

The usual defense of high US CEO pay is that it is set by market forces. If that's true, doesn't that mean the US has a relative shortage of CEO talent compared to the other advanced countries? (A short supply of qualified candidates has driven up prices more in the US than in other countries.)  On the other hand, if US CEO talent is relatively as abundant as in other countries, doesn't that mean the US CEO pay market has failed and should be fixed to eliminate inefficiencies?

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