1. CEO Pay, Incentives and Governance Brian Bell and John Van Reenen Discussant: Alex Bryson NIESR Performance Pay Workshop, 26 th June 2014

2. Why Does All of This Matter? Efficiency – Are we getting the right people to the top and are we paying them in a way that gets the best out of them? Equity – Total share of all earned income going to the top Policy – If we are worried about efficiency or equity what should we do Government Firms

3. Difficult Terrain Technically tricky – Deferred compensation makes it hard to disentangle which performance the CEO is being compensated for – Separating “luck” from the CEO causal effect So inference is tricky – How sure can we be about what we have found Just as well we’ve got Brian – Banker – Economist – Pragmatist

4. Focus on governance Yes elasticities have risen Much of it appears to be luck Hard to tie pay to CEO performance with LTIPs But governance can help – Institutional investors’ ability/incentives to monitor But is there anything else we can do? – China: CEO sits on own Compensation Committee, gets premium – Non-executives? – Shareholder right to vote may make things worse – Blunt instruments may make things worse Caps on bonus as % salary?

5. The Labour Market for CEOs and The Rest What lies behind managerial power? – How scarce are these skills? CEO merry-go-round How global are CEO markets? – How global should they be? Tournaments – do they work? Interesting to see how little other workers share in firm fortunes – How much should we care? – After all they are exposed enough (wages, employment) And have limited ability to change things