Executive pay: must ''winner-take-all'' mean that shareholders lose out?

Abstract

This paper reviews the evidence on the rapid growth of top executive pay in the UK. It links this to developments in other countries, notably the USA, and examines various theoretical approaches to the determination of executive compensation. The authors argue that the popular belief (derived from principal-agent theory) that executive pay should be linked closely to performance is too simplistic. Policy proposals to reform corporate governance cannot be justified on these grounds.