Many business critics complain that executive compensation especially non-salary perks are a way for executives to appropriate profits from the company. A new paper from the U.S. National Bureau of Economic Research argues that some perks make executives more productive and their companies more profitable.
The authors examined data on more than 300 publicly traded U.S. firms between 1986 and 1999, spanning a number of industries. They find that perks are pervasive:
The authors argue that while some executive privileges are not economically justifiable, many other privileges do make economic sense. For example:
Overall, the researchers argue that executive perks increase executive productivity and should not be universally dismissed. Instead, perks should be an important aspect of business and organisational design.
Source: Carlos Lozada, Are Perks Really Managerial Excess? NBER Digest, November 2004; based upon: Raghuram Rajan and Julie Wulf, Are Perks Purely Managerial Excess, National Bureau of Economic Research, Working Paper No. 10494, May 2004.
For text http://www.nber.org/digest/nov04/w10494.html
For abstract http://papers.nber.org/papers/w10507
For more on Corporations:http://www.ncpa.org/iss/eco/
FMF Policy Bulletin/ 30 November 2004
