Recent research shows that a high wage gap between managers and workers identifies better-performing firms, but the stock market does not seem to price this information. In this paper, we show that not all investors neglect pay inequality. Using a unique data set on German firms' employee...

This discussion provides several explanations for the evidence presented in Balachandran and Mohanram (2010) that are consistent with efficient contracting. I also show that - contrary to the suggestion of the title - CEOs do not benefit from value destroying growth in earnings. Finally, I argue...