The Productivity Commission’s Inquiry into Executive Compensation in Aus-
tralia reported that \strong growth in executive remuneration from the 1990s
to 2007, and instances of large payments despite poor company performance,
have fuelled community concerns that executive remuneration is out of con-
trol.” Discuss whether economic theory and the available empirical evidence
justi es high executive compensation.
In your assignment you must discuss at least three relevant research papers (published in
economics journals) and discuss their ndings. Credit will be given for nding appropri-
ate papers and referencing all papers appropriately. The papers given in the `empirical
evidence’ section below can contribute to satisfying this requirement, but you may choose
three di erent papers.
Suggested references
Background readings
John M. Abowd and David S. Kaplan (1999) `Executive Compensation: Six Ques-
tions That Need Answering’, Journal of Economic Perspectives 13(4), pp. 145-168
http://www.jstor.org/stable/2647017
Productivity Commission Inquiry Report (2009) `Executive Remuneration in Aus-
tralia’
http://www.pc.gov.au/__data/assets/pdf_file/0008/93590/executive-remuneration-
report.pdf
Empirical evidence
Marianne Bertrand and Sendhil Mullainathan (2001) `Are CEOs Rewarded for
Luck? The Ones without Principals Are’, The Quarterly Journal of Economics
116(3), pp. 901-932,
http://www.jstor.org/stable/2696421
Michael C. Jensen and Kevin J. Murphy (1990) `Performance Pay and Top-Management
Incentives’, Journal of Political Economy 98(2), pp. 225-264,
http://www.jstor.org/stable/2937665
There is a rm 1500 word limit for this assignment (excluding reference list). You must
include a word count on the rst page of your assignment. There is no requirement to
meet this limit: shorter assignments can gain full credit.
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