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Theories of CEO Pay

CEO pay appears to be on the rise again. Additionally, executive pay in the U.S. is about 20 times higher than it is in European countries. Explain three theories about CEO pay and evaluate, whether they can explain why 1) executive pay is so much higher than the pay of an average worker, 2) it does not vary much with the value of the firm, and 3) it is so much higher in the U.S. compared to Europe.

Solution Summary

Theories of CEO Pay are presented.