Assignment :
The Productivity Commission's Inquiry into Executive Compensation in Australia 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 control." Discuss whether economic theory and the available empirical evidence justifies high executive compensation.
In your assignment you must discuss at least three relevant research papers (published in economics journals) and discuss their findings. Credit will be given for finding appropriate papers and referencing all papers appropriately. The papers given in the ‘empirical evidence' section below may contribute to satisfying this requirement, but you are recommend to choose three or more economics journals papers from other resources in order to gain a better grade.
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 https://www.jstor.org/stable/2647017
• Productivity Commission Inquiry Report (2009) ‘Executive Remuneration in Australia'
https://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,
https://www.jstor.org/stable/2696421
• MichaelC.JensenandKevinJ.Murphy(1990)‘PerformancePayandTop-Management Incentives', Journal of Political Economy 98(2), pp. 225-264, https://www.jstor.org/stable/2937665
2 Final assignment Submission
There is a firm 1500 word limit for this assignment (excluding reference list).
Distribution of marks
The assignment will be marked out of 25. Marks will be assigned as follows:
10 Use of relevant economic theory
8 Evaluation of empirical evidence, including empirical strategy used and limitations of conclusions
5 Coherency of argument and conclusion
2 Choice of additional empirical evidence and appropriate referencing of sources
Other information
Finding further journal articles: look at references in background reading; look at articles cited in those references; look for articles citing those references (eg. using Google Scholar).
You should include a list of references used. Any consistent citation style is acceptable
It is not appropriate to cite lecture notes (from this course or any other course). When referring to a paper in your assignment, use the authors' surnames - for example: "It can be argued that CEOs are rewarded for luck (Bertrand and Mullainathan 2001)." and not "It can be arged that CEOs are rewarded for luck (Marianne and Sendhil 2001)."
Do not try to include every part of all background readings. Choose the parts you think are most relevant and important to address the question and describe them well
Including diagrams to illustrate economic theory is encouraged. In my experience, it is best to draw these yourself rather than extracting from a different paper. It is acceptable to have diagrams on the hard copy but not soft copy