Econ­o­mist slams CEO pay

The Myanmar Times - - International Business -

BENGT Holm­strom, the Fin­nish econ­o­mist whose con­tract the­ory earned him the No­bel eco­nomics prize, said ex­ec­u­tive com­pen­sa­tion has got­ten out of hand and contributed to the col­lapse of En­ron Corp.

Mr Holm­strom, who shared the 2016 No­bel with fel­low econ­o­mist Oliver Hart, ex­plored the way employment con­tracts can shape be­hav­iour and reach mu­tu­ally ben­e­fi­cial out­comes for the hirer and hiree.

But he told an au­di­ence at the Mas­sachusetts In­sti­tute of Tech­nol­ogy, where he now works, that their re­search hasn’t al­ways got­ten through to those who de­sign pay pack­ages.

He said the col­lapse of En­ron, the high-flying en­ergy com­pany that failed in 2001, re­lated to ex­ec­u­tives’ pay deals, with gen­er­ous stock op­tions, that did not align their in­ter­ests with the com­pany’s.

He told jour­nal­ists that ex­ec­u­tive pay had got­ten too com­pli­cated.

“There’s so many pieces of it and it’s just a mess ... I wish they would lis­ten a lit­tle bit more about what we know or un­der­stand about ex­ec­u­tive com­pen­sa­tion.” –

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