Heard off the street: News about big CEO pay actually increases it

[Omaha Steve]

http://www.post-gazette.com/pg/07294/826924-28.stm

Sunday, October 21, 2007
By Len Boselovic, Pittsburgh Post-Gazette

Business journalists have spilled countless barrels of ink exposing the outrageous excesses of executive compensation, largely to no avail. The more these self-righteous, underpaid Pavlovian dogs dutifully document the princely sums lavished on America's corporate elite, the more executive compensation climbs.

Researchers at the University of Colorado at Boulder may have discovered why. Their explanation is enough to drive an ink-stained wretch to drink.

"Our findings suggest that the press appears to contribute to high CEO pay, which is ironic given some journalists' concerns about outsized CEO compensation," Ph.D. candidate Markus Fitza and associate professors Mathew Hayward and Kai Larsen write in a recent paper presented to the Academy of Management.

The trio started with the theory that the more attention CEOs get in the media, the greater the variable compensation -- basically everything but their salary -- they receive. Their theory wasn't based on the fact that the more successful a company is, the more the media will spread the gospel of the CEO's accomplishments, although that thought did cross their minds.

Rather, they wanted to test whether any publicity -- good, bad or neutral -- boosted CEO pay because of the impact frequent stories may have on directors who determine how large of a bonus a CEO deserves. In short, does publicity in distinguished media outlets that directors read make them more likely to pay CEOs more?

The Colorado researchers examined more than 1,500 companies and CEOs from 1997 to 2005 and how often they appeared in Business Week, the New York Times, Wall Street Journal and other major national business publications. Their findings disprove the old saw that familiarity breeds contempt.

FULL story at link.