In 1980, the average CEO’s compensation was about 42 times what the average worker was paid, and by 2007, CEOs received about 344 times the average worker salary. There’s a debate over whether this ballooning of executive compensation is a failure of corporate governance, evidence of abuse of power, or just a reflection of market forces -- that top CEOs must be paid top dollar, or they’ll take their (presumably irreplaceable) talents to other organizations. But how do companies arrive at these astronomical sums?

Thursday, Oct. 1, 2009, 7:30 p.m.Sunday, Oct. 4, 2009, 7:30 a.m.Monday, Oct. 5, 2009, 4:30 a.m.  Setting CEO Pay – Executive Compensation

Short-term thinking hurts companies. But finance students at Maryland Smith learn a different approach. They focus on value maximization, not profit maximization.

Companies have built-in incentives to avoid short-termism. But they fall into the myopia trap when they confuse value creation with income maximization.

Critics come down hard on shareholder primacy. But Maryland Smith professor Michael Faulkender says people err when they overlook risk/reward economics.