Consultants and High CEO Pay

A study finds no evidence that conflicts of interest inflate compensation.

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Why do pay packages for CEOs seem to be getting more and more extravagant? Some blame the consultants hired by companies to work out the details of these packages, saying they have conflicts of interest that cause them to inflate the payouts. In The Role and Effect of Compensation Consultants on CEO Pay, Brian Cadman of Northwestern University and Mary Ellen Carter of the Wharton School at the University of Pennsylvania and Stephen Hillegeist of the international business school INSEAD look at consultants who might be particularly biased, such as those who provide additional services for their clients beyond designing compensation. But they find no evidence that more potential conflicts of interest lead to higher pay for CEOs.