Notre Dame Faculty Challenge Management Myths
University of
Questioning Conventional Wisdom
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The U.S. government took away a company's right to deduct executive pay if it exceeded $1 million and was not sensitive to company performance," says Notre Dame Accounting Professor Margaret Shackell-Dowell, who studied more than 170 Fortune 500 companies. "However, this 1992 law had unforeseen side effects: companies began to see the $1million level as the floor, not the ceiling." Unwittingly, the government set a standard in 1992 by associating a number with executive pay. One million dollars became a base amount; companies paying executives less than this felt they had to sweeten the deal to compete for executive talent," she says. According to Shackell-Dowell, "Traditional methods of
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regulating pay – such as pay-for-performance measures – are still the most effective way to regulate executive compensation."
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