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11/10/2016
The relationship between the pay and performance of chief executives remains ‘asymmetric’, according to analysis from the Centre for Economic Performance at the London School of Economics. Pay responds more to increases in shareholders’ return performance than to decreases and this relationship is strongest in those organisations where governance appears weak.
There is also substantial ‘pay-for-luck’ as CEO pay increases with random positive shocks, even in cases when the CEO has equity awards that are explicitly linked to the employing organisation’s performance relative to similar firms.