Board members Quote by Paul Krugman
“The key reason executives are paid so much now is that they appoint the members of the corporate board that determines their compensation and control many of the perks that board members count on. So it's not the invisible hand of the market that leads to those monumental executive incomes; it's the invisible handshake in the boardroom.”
About This Quote
Executive pay is driven by self‑interest: executives select board members who approve their compensation, creating a feedback loop rather than market forces.
In simple terms: Self‑appointed boards inflate pay.
Key Takeaway
Corporate governance can be self‑serving.
Themes
corporate governance
economics
power dynamics
Mood
critical
analytical
Type
analytical
political
When to use this quote
- shareholder meetings
- regulatory reform
- executive contracts
Key Concepts
agency problem
institutional capture
Practical Applications
- implement independent board selection processes
Questions to Reflect On
- How can shareholders enforce board independence?
- What incentives align board and shareholder interests?
A Different Perspective
May underestimate market pressures on pay.
