This article argues that the increasing focus on pay by policymakers, shareholders, and the media has magnified its importance as a gauge of success for top executives and created a vicious cycle of ever-higher pay demands. It suggests ways for policymakers, shareholders, and boards of directors...

Financial incentives are important tools for aligning the interests of executives and shareholders, particularly in markets with dispersed share ownership where investors struggle to actively monitor management. Today, however, there is widespread investor dissatisfaction with executive...