The Productivity Commission's Inquiry into Executive Compensation in Australia reported that "strong growth in executive remuneration from the 1990s to 2007, and instances of large payments despite poor company performance, have fuelled community concerns that executive remuneration is out of control." Discuss whether economic theory and the available empirical evidence justifies high executive compensation. In your assignment you must discuss at least three relevant research papers (published in economics journals) and discuss their findings. Credit will be given for finding appropriate papers and referencing all papers appropriately. The papers given in the ‘empirical evidence' section below can contribute to satisfying this requirement, but you may choose three different papers.

Suggested references Background readings

• John M. Abowd and David S. Kaplan (1999) ‘Executive Compensation: Six Questions That Need Answering', Journal of Economic Perspectives 13(4), pp. 145-168 http://www.jstor.org/stable/2647017

• Productivity Commission Inquiry Report (2009) ‘Executive Remuneration in Australia' http://www.pc.gov.au/__data/assets/pdf_file/0008/93590/executive-remuneration- report.pdf Empirical evidence

• Marianne Bertrand and Sendhil Mullainathan (2001) ‘Are CEOs Rewarded for Luck? The Ones without Principals Are', The Quarterly Journal of Economics 116(3), pp. 901-932,

http://www.jstor.org/stable/2696421

•MichaelC.JensenandKevinJ.Murphy(1990)‘PerformancePayandTop-Management Incentives', Journal of Political Economy 98(2), pp. 225-264, http://www.jstor.org/stable/2937665 other information: - There is a firm 1500 word limit for this assignment (excluding reference list). - Finding further journal articles: look at references in background reading; look at articles cited in those references; look for articles citing those references (eg. using Google Scholar). - Do not try to include every part of all background readings. Choose the parts you think are most relevant and important to address the question and describe them well - including diagrams to illustrate economic theory is encouraged.