Corporate Executive Salaries – The Argument from Economic Effi ciency

Th is motivation explains the desire for continually increasing executive salaries, but does not justify them. Nor does it explain why the higher salaries are agreed to. Recognition of ability is an understandable desire in members of every profession, and higher salary is one of the means of providing it. Yet it is not the case that salaries in every other profession are continually rising in real terms. Th us the desire for recognition might explain the motivation of executives seeking higher salaries, but does not explain why they are awarded. Th is motivation also...