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Investors May Need a New Approach to Curbing Executive Pay
Last year the CEOs of Russell 3000 companies saw their average compensation hit $5.8 million — a 15 percent median increase over 2010. But in the U.S. and elsewhere, efforts to reduce executive pay packages by publicly shaming so-called fat cats may get the opposite result.
Theres evidence that clamping down on CEO pay can backfire. In a 2011 paper Erasmus University Rotterdam finance professor Ingolf Dittmann and two colleagues analyzed some 1,400 U.S. public companies to see how they would respond to limits on compensation. Among the unintended results: higher average payouts.