It isn’t everyday you get to write about to a Nobel Prize Winner about the work your students have done. Delia and Alex did some really original work on CEO compensation. Professor Dan O’Connor and I are very proud of the work these two extraordinary students have done!

Dear Dr. Thaler:

I recently finished reading Misbehaving.  Sadly, I am somewhat behind on my reading list, so it took some time to get to Nudge and this book.  I enjoyed them immensely, particularly when you described the allocation of office space in the business school, a process our business school is doing now.  

On page 30 of Misbehaving, you mention CEO pay seems to correlate with size (revenues) of the organization rather than profitability.  Professor Dan O’Connor (also from Moravian University and also an accounting professor) and I were the faculty mentors for two studies of the CEO Pay Ratio.  The first was written by Alex Tursi, who currently works for PricewaterhouseCoopers and Delia Geyer, who just finished her MA in economics from Lehigh University.  The CEO Pay Ratio is a new exciting topic for accounting professionals. (Well, as exciting as accounting can be, I suppose). 

Both students analyzed the financial results of the companies composing the three Dow indices (Industrials, Transportation, and Utilities). Delia, writing the year after Alex, found there was no correlation between size of the organization and  CEO compensation.  The tentative conclusion to her thesis was: “Using data from 2017, 2018, and 2019, I found no significance between revenue and the Ratio for the companies that make up the three Dow Jones Averages once I controlled for other variables that could affect both  the ratio and revenue. Data for this study is limited as the Ratio disclosure has only been law for three years”.  

As you know the CEO Pay Ratio is a controversial topic and is worth exploring as  more information becomes available. An economics professor here at Moravian has also done some research in this field so  hopefully we can continue this study, continuing to roll it forward for succeeding years. 

With kind regards,