CEO pay, part II

It could very well be that some of this is due to the fact that taller males are more self-confident. But I still think it works against the hypothesis of an efficient market in CEO pay based on their cognitive aptitudes. Of course I wouldn't be surprised if shareholders get nervous having a midget CEO as the face of the company....

If the cause of this is really shareholders, then that would seem that this is an argument against Corporatism. (Assuming one wants efficiency.)

Might this old Gene Expression post be related?...
http://scienceblogs.com/gnxp/2008/10/the_fact_of_the_irrational_vot.php

"But I still think it works against the hypothesis of an efficient market in CEO pay based on their cognitive aptitudes."

Well, height and IQ are associated, although the relationship is too weak to explain such a towering CEO class.

http://en.wikipedia.org/wiki/Height_and_intelligence

They probably also have good sperm counts (based on both masculinity and cognitive aptitude):

http://www.udel.edu/educ/gottfredson/reprints/2008semen.pdf

although the relationship is too weak to explain such a towering CEO class.

what's the point of pointing to an r-squared of 4% when you see that sort of overrepresentation? (i'm aware of that data of course)

They probably also have good sperm counts (based on both masculinity and cognitive aptitude):

right, all the better to jizz all over the board. the part about masculinity is more persuasive to me, though it would be interesting to see what basal testosterone levels are. other research shows that relative height at age 16 predicts all the income difference, so if that held for CEOs that would get us somewhere. though again, i bet endogenous confidence is less of an issue here than how the people doing the hiring perceive someone physically. i.e., "do they look the part." everything's not about IQ dude. i've met many physicists, and they aren't nearly as tall as this set ;-)

Might this old Gene Expression post be related?...

yes, i was thinking about the 'irrational voter' here. caplan's thesis is a general one. large bureaucracies start to resemble governments.

I am always amazed at how many people, when they don't care to do something about a problem, will say the government should do something about the problem.

People can always choose not to invest in companies with excessive pay. Of course if the government is investing for you...

But that is another problem.

A simple solution to runaway executive pay:

http://sec.gov/rules/proposed/s70306/ddkane4397.htm

The SEC should pass a regulation requiring that all publicly traded companies allow their shareholders to vote on the following (binding) resolution each year.

"The total compensation of both the CEO and the CFO shall not exceed $1 million in the coming fiscal year."

Those who dislike government meddling in business have little to complain of here since the government isn't telling any business how to set salaries. The government is just requiring that business owners be allowed to vote on a specific option.

What would happen of such a regulation were in place? Senior executives would complain long and loudly. Many large shareholders --- especially pension funds --- would gladly vote for lower compensation. Many mutual funds would feel pressured to do so. My guess is that the resolution would pass at many companies.

There would then be significant (downward) pressure on executive salaries across the board. If you're the CEO/CFO of a big company, there are very few employees who you think should be paid more than you are. Of course, this won't allow you to pay people (much) less than they could get elsewhere, but the number of people for whose services the "market" is willing to pay more than $1 million per year is small. The very best baseball players, rock stars, entrepreneurs and Wall Street traders would still make millions, but only because any attempt to lower their pay would cause them to go elsewhere with their talents.

Some would say that this plan won't work since the companies whose shareholders agree to pay more than $1 million per year (whether they be public or private companies) will snap up all the "best" executive talent. Maybe. But, our ability to measure executive talent is so limited that it would be hard for any company to easily identify a CEO candidate who is significantly better than many other candidates for the job.

There is a sense in which such a scheme, if implemented, would amount to implicit collusion among the employers of senior executives. Perhaps. But collusion in the service of class warfare is no vice.

I agree with all that (I did specifically say that the relationship was too puny), and I was just surprised you didn't mention and reject it for the benefit of the readers.

I wonder if the height of CEOs increases with the height of the hiring committee?

I wonder if the height of CEOs increases with the height of the hiring committee?

it would be interesting to see it broken down by industry. my impression is that entrepreneurs are less likely to be big-jawed tall he-men than corporate ladder climbers.

People can always choose not to invest in companies with excessive pay.

i agree that it really isn't the government's business normally, but i don't think this is really so easy. most people have money invested through pension funds and what not. they aren't doing the trades themselves.

p.s. if we can do lasik it seems that good cosmetic surgery to attach colored contacts would be easy if there was a demand. the main issue i guess for wearing blue eye contacts in your teen years is that you have to do with not having blue eyes as a child, which might fuck up self esteem ;-)

It is a documented social science finding that the more intelligent tend to hue more closely to the ideal of H. economicus.

And chimpanzees. Too bad they aren't taller, or we could recruit some of them as emergency CEOs. Maybe enlarged canines would project the necessary gravitas?

Here is an idea for a new article:

Top CEOs Trade Monetary Compensation for the Most Important Currency Today: RESPECT!

If today's CEOs and top management at companies decide to voluntarily restructure compensations within companies, to reduce their salaries from 300+ x average worker salary to 42 x average worker salary (and management also... to similar levels to 1980s multiples) what effect would that have on today's economy? Would that solve the unemployment âcrisisâ and raise the level of living of the majority of people? If managed well would this âactionâ allow companies to hire more people, reduce some stress on existing workers, and increase company profits? Are there any stats that can run this scenario?
Even if âutopicâ one never knows: media could start a "new movement" !!! Perhaps if we focus on the "unsung heroes" - the few CEOs that actually are being compensated reasonable salaries so the company and workers can do better, (give them their "15 min of fame"), maybe more will follow .... :)
Wouldn't that be nice!!! :).

Razib,
the study cited in the Slate piece is obsolete. The paper below reproduces that affect, but then sees how IQ affects the regression. Adult height regains much of its big effect on earnings, but adolescent height seems to act largely through IQ (that is, earlier growth spurts correlate with IQ).

STATURE AND STATUS: HEIGHT, ABILITY, AND LABOR MARKET OUTCOMES
Anne Case, Christina Paxson
http://www.nber.org/papers/w12466

doug, interesting in light of Delayed Brain Development Associated with Greater Intelligence.

Yeah, that sounds almost opposite.

Causally, the article you point seems easier to explain than the one I point to. But I don't see that the timing of the height growth spurt should have anything to do with the timing of the brain growth spurt, especially since the brain growth spurt is before puberty. Since the timing is different, it would take a longitudinal study to compare them.