ABSTRACT
Why did CEO remuneration explode during the 1990s and persist at high levels, even after the internet bubble burst? This chapter surveys the alternative explanations that have been given of this paradox, mainly by various economic theories with some extension to political science, business administration, social psychology, moral philosophy and network analysis. It is argued that the diffusion of stock options and fi nancial market-related incentives, supposed to discipline managers, have entitled them to convert their intrinsic power into remuneration and wealth, both at micro and macro level. This is the outcome of a de facto alliance of executives with fi nanciers, who have exploited the long-run erosion of wage earners’ bargaining power. The chapter also discusses the possible reforms that could reduce the probability and the adverse consequences of CEO and top-manager opportunism: reputation, business ethic, legal sanctions, public auditing of companies, or a shift from a shareholder to a stakeholder conception.
