Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 10

President Clinton proposed eliminating the tax deduction for all compensation over $1 million for CEOs unless the pay is tied to company performance. Proponents argue that this proposal will benefit shareholders. "Everyone knows that CEOs are overpaid and that their pay is not appropriately tied to performance. This legislation helps solve both problems." Present an argument against this proposal.