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by michaelt 3380 days ago 

  Do you think that Yahoo's board decided to grant Mayer
  the golden parachute [...] out of sympathy to a fellow
  member of the nobility?
A number of explanations have been posited for the fact executive pay has soared in recent decades while other workers' pay has remained stagnant.

Bebchuk and Fried's "Pay without Performance" attribute this to the fact that boards routinely approve pay packages that serve the CEO rather than shareholders, instead of bargaining with the aim of maximising shareholder wealth.

They identify several factors underlying this - shareholder inactivity bears a big part of the blame - but one factor is essentially yes: It's in the interests of people who are at the top of business to approve high pay for people who are at the top of business.
1 comments
grandalf 3380 days ago
> A number of explanations have been posited for the fact executive pay has soared in recent decades while other workers' pay has remained stagnant.

I think a simpler explanation is supply and demand.

If you want to hire as CEO someone who has worked in a close competitor's most profitable business unit and is credited for much of its success and culture, the pickings for Yahoo were quite slim. Also, Yahoo had brought in several other highly successful CEOs, including its original founder, who had all failed miserably. Mayer was clearly a last-ditch attempt to salvage the company.

> pay packages that serve the CEO rather than shareholders

You are describing incentives that do not simply reward share price growth? If so, and if you think supply and demand for qualified executives has nothing to do with it, what kind of pay package do you think Yahoo should have offered?

I'd argue that there has to be a time bias in the package. Share price growth is fine if the board is OK with Mayer taking 30 years to grow the company into a bigger valuation just before deciding to retire. But if more action in the near term is desired, and behavior other than the typical private equity style fat trimming is desired, what options are left?

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