© The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org
Introduction to the Symposium on Executive Pay*
University of Munich, Department of Economics, Ludwigstr. 28 III VG, 80539 Munich, Germany. e-mail: englmaier@lmu.de
University of Munich, Department of Economics, Ludwigstr. 28 RG, 80539 Munich, Germany. e-mail: Illing@lmu.de
The Eitan Berglas School of Economics, Tel-Aviv University, Tel-Aviv 69978, Israel. e-mail: sadka@post.tau.ac.il
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The issue of how to remunerate executives has been hotly debated, at least as far back as Berle and Means (1932) who first stressed the separation of ownership and control and the emergence of a powerful class of professional managers. But for a long time the debate had been largely restricted to academic seminars and practitioners' discussions until the turmoil of the current financial crisis brought the issue into the limelight of public debate. This went so far that, shortly after taking office, President Obama announced in early 2009 that executives of companies receiving federal bailout money will have their pay capped at $500 000 under a revised financial compensation plan. He defended this measure by stating that 2008's; handout of $18 billion in Wall Street bonuses was ‘exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis: a culture