Why are CEO paychecks so large?

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Why do some CEOs make such big paychecks, whether their companies do well or not? That is what the United States Securities and Exchange Commission is trying to figure out.

New proposed rules would mean that CEOs could not set their own paychecks and bonuses according to their hearts’ desires. Instead, they would have to disclose performance measures to justify executive pay.

The companies would have to show five separate metrics that were used to determine executive compensation. The rule will not go into effect until the SEC puts it up for public consultation.

While this is good, allowing the companies to choose from five metrics in their own companies is not a major hurdle. Even if revenue drops, there is always some number that can be massaged to show progress if that is the intent. As Mark Twain wrote: “Lies, damn lies, and statistics.”

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