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Politics : View from the Center and Left

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To: Cogito who wrote (92760)	10/31/2008 3:30:48 PM
From: TimF	Read Replies (1) of 541777

The fact that they could start their own companies would not increase that compensation, since the additional risks they face when doing so would make such options less attractive to them. The fact that they could start their own companies would indeed put upward pressure on CEO compensation. The fact that it has more risks, just reduces the amount of pressure, it doesn't eliminate it. If the CEO thinks he could make $50mil from his own company, than (assuming he doesn't have a strong preferences between owning a smaller company and heading a larger one) you won't have to pay him $50mil to head your company because you offer lower risk. Maybe you only have to pay him $10mil, but the fact that he thinks he's got a real shot at $50mil is one of the reasons that you have to pay him $10mil rather than some lesser amount.

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