Tutorial 1 Guide - Tutorial 1 Guide 10 February 2009 07:08...

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Please facilitate a discussion regarding the financial crisis. First provide basic background regarding the cause of the crisis, i.e. the provision of credit to parties who were not credit worthy, and the resale of that debt, which led to mistrust between financial institutions accompanied by banks eventually becoming unwilling to lend to one another. The main thrust of the debate is actually intended to focus on the executive compensation/responsibility. .. What determines the demand for financial executives? What determines the supply of financial executives? How does the interaction between supply and demand determine executive compensation? Why do we see large differences between the compensation of individuals in the financial sector and the compensation of individuals with similar levels of human capital in other industries? Why do we see large differences between the compensation of American financial executives and financial The article below is a critique of Frank's investigation of executive pay which is meant to facilitate debate February 6, 2009, 6:45 am Supply, Demand and Executive Pay By Uwe E. Reinhardt Uwe E. Reinhardt is an economics professor at Princeton. Whether or not compensation is fair depends on how you think about an employee’s contributions to the company. Let’s take it in two steps. First is the idea that an investor- owned corporation is socially responsible for maximizing the wealth of the firm’s owners without violating the laws of the land period. For practical purposes, owners wealth is defined as the firm ’s “market capitalization” or “equity value,” measured by the price per share of the firm’s common stock times the number of common shares the firm has iss
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This note was uploaded on 05/23/2011 for the course ECON 203 taught by Professor Jules during the Spring '11 term at University of Cape Town.

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Tutorial 1 Guide - Tutorial 1 Guide 10 February 2009 07:08...

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