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Executive pay is also about signalling to stock markets. Executive pay is part of what some traders use to gauge the health of a company, so sometimes you can a

Executive pay is also about signalling to stock markets. Executive pay is part of what some traders use to gauge the health of a company, so sometimes you can actually artificially inflate your stock by more than it costs you, by increasing the pay of your CEO.

confluence 13y ago
That's probably the dumbest signal in history.
dredmorbius 13y ago
Citation required. Though it would be interesting if true.
- lotsofmangos 13y ago
  There was a study on this about why boardroom pay for public companies in the UK shot up after the laws came in forcing public disclosure of boardroom pay. I not got time right now, but I'll look it up when I get a chance.
- lotsofmangos 13y ago
  I haven't found the original study yet, but here's an interesting example of the kind of thing. Note the talk of signals, this guy isn't looking at this raise as something JP Morgan thought Dimon deserved, he talks it as JP Morgan wanting to signal to others through the pay that this is the guy, so, buy our shares. - The board’s decision to boost Dimon’s annual pay despite mounting legal settlements shows he probably will get the full options award, said Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc. “It’s obvious the board wanted to send a signal about what they think of him,” Johnson said. “It’d be very inconsistent to say, ‘You’re our guy, and we want to send an emphatic public message that we think very highly of you.’ And then, ‘Oh by the way, you didn’t earn this over the last five years.’” ... ... While Sorrentino and Johnson said another major legal setback or trading loss could threaten Dimon’s options, last week’s pay increase sends the message that the board is willing to give him the full amount. “I don’t think the bank performed at a $20 million level, but I think they were trying to send a signal that they think he’s the guy,” Johnson said. “Unless something happens in the next six months, he’s highly likely to get it.” http://www.bloomberg.com/news/2014-01-27/jpmorgan-seen-paying-dimon-34-million-award-this-year.html http://www.bloomberg.com/news/2014-01-27/jpmorgan-seen-payin...

confluence 13y ago

That's probably the dumbest signal in history.

dredmorbius 13y ago

Citation required. Though it would be interesting if true.

lotsofmangos 13y ago
There was a study on this about why boardroom pay for public companies in the UK shot up after the laws came in forcing public disclosure of boardroom pay. I not got time right now, but I'll look it up when I get a chance.
lotsofmangos 13y ago
I haven't found the original study yet, but here's an interesting example of the kind of thing. Note the talk of signals, this guy isn't looking at this raise as something JP Morgan thought Dimon deserved, he talks it as JP Morgan wanting to signal to others through the pay that this is the guy, so, buy our shares. - The board’s decision to boost Dimon’s annual pay despite mounting legal settlements shows he probably will get the full options award, said Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc. “It’s obvious the board wanted to send a signal about what they think of him,” Johnson said. “It’d be very inconsistent to say, ‘You’re our guy, and we want to send an emphatic public message that we think very highly of you.’ And then, ‘Oh by the way, you didn’t earn this over the last five years.’” ... ... While Sorrentino and Johnson said another major legal setback or trading loss could threaten Dimon’s options, last week’s pay increase sends the message that the board is willing to give him the full amount. “I don’t think the bank performed at a $20 million level, but I think they were trying to send a signal that they think he’s the guy,” Johnson said. “Unless something happens in the next six months, he’s highly likely to get it.” http://www.bloomberg.com/news/2014-01-27/jpmorgan-seen-paying-dimon-34-million-award-this-year.html http://www.bloomberg.com/news/2014-01-27/jpmorgan-seen-payin...