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Commenting on the High Pay Centre's briefing on executive pay, Deputy Director of the Adam Smith Institute Sam Bowman said:
Investors see executives as extremely important to the value of firms, with the strategic decisions they make often determining whether a firm flourishes or goes bankrupt. For that reason, it can be sensible to pay a lot to get skilled executives with good judgement.
It’s not hard to find examples on both sides: when Steve Ballmer stepped down as CEO of Microsoft, the firm’s value increased by billions overnight. Compare Ballmer to Tesco’s CEO David Lewis, who investors judged would make the firm millions of pounds more valuable.
A Steve Jobs can make a firm; a Steve Ballmer can break it.
CEO pay rewards extraordinary talent and skills in a highly competitive, globalized market. Good decision-making from the top might not be invaluable, but CEO pay reflects that it is as close to invaluable as one can get.
Notes to Editors:
The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.