Nemesis of overpaid CEOs finds more workplace battles

Marianne Bertrand helped unleash a shareholder backlash against CEO pay with research she began while still in graduate school.

In a 2001 paper based on her work as a PhD candidate at Harvard University, the 43-year-old labour economist documented that chief executives at US oil companies gained raises when their companies' fortunes improved because of changes in global oil prices beyond their control. The same pay-for-luck phenomenon occurred with multinational businesses when currency fluctuations, rather than management strategies, boosted results, she found.

"Marianne's work challenged conventional thinking about executive compensation and corporate governance," said Glenn Davis, director of research for the Washington-based Council of Institutional Investors.

Her research had influenced shareholder advocates who debunk arguments that CEO pay was an effective means of providing incentives or rewarding performance, said Nell Minow, founder and a director of GMI Ratings, which evaluates governance risk at public companies.

"I am a great fan of Bertrand's work," Minow said. "Her analysis is compelling in showing that a significant portion of pay at the highest levels is related to overall market or sector performance and not the performance of the individual company, much less the individual executive."

In the wake of shareholder concerns, the US Securities and Exchange Commission in July 2006 approved the most extensive overhaul of executive-pay rules in more than a decade, requiring companies to report the total compensation for their five highest-paid officials, including salaries, benefits and stock. In January 2011 the agency gave investors the right to weigh in on pay packages.

Bertrand's influence extends beyond helping to shape the debate over CEO compensation and disclosure. Her work on the US labour market revealed that managers still show racial bias.