December 2016 (Volume 68, Number 7)
In October 2016, the Sveriges Riksbank (Swedish Central Bank) Prize in Economic Sciences in Memory of Alfred Nobel—commonly but incorrectly called the Nobel Prize in Economics—was awarded to two European-born, U.S.-based economists, Oliver Hart and Bengt Holmström, for their work on contracts related to executive pay. Hart and Holmström were lauded for having theorized what was thought to be the optimal mix of risk and incentives in pay packages for corporate executives, thereby determining the appropriate combination of basic salary, bonuses, and share options. In other words, they received the Riksbank Nobel Memorial Prize for their efforts to rationalize the exorbitant paychecks of CEOs and other corporate leaders—a direct service to big business. | more…