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I had the opportunity to moderate a panel discussion this afternoon, hosted by my school’s JD/MBA association, entitled “CEO Hiring, Firing and Compensation in a Post-SOX Private Equity Boom.” The panelists were Professor Steven Kaplan (GSB), who testified to Congress about CEO compensation and HR 1257 in March of this year, Professor Douglas Baird (Law), the global authority in the academic world on bankruptcy and reorgs who has written on the importance of CEO hiring and firing vs. compensation structure, and Professor Todd Henderson (Law), who is delivering the annual Chicago’s Best Ideas lecture tomorrow and will argue that CEOs are actually underpaid in today’s marketplace.

The discussion was extremely interesting and focused on why CEO has reached the levels it has today, whether it is deserved, and whether it is societally beneficial for it to continue to increase. In short, Kaplan thinks in large part that CEO pay is not overinflated and bases much of his argumenton the fact that the market for top managerial talent has gotten more expensive thanks to hedge, private equity, and VC fund payouts. Henderson’s beliefs that CEOs of public companies are underpaid are in part based on the fact that SOX has increased CEO liability and scrutiny, and that their payscale has not adjusted accordingly. Baird generally believes that too much time is spent on compensation package structure and not enough on picking the right person to do the job.

We were limited to an hour and did 15 minutes of Q&A so we were really only to brush the surface of the issues. I was hoping to be able to hear their thoughts on the “upward spiral” theories (aka: the Lake Wobegon effect) of CEO compensation which posit that since all major CEO hires involve compensation consultants, and every company hiring wants their CEOs to be compensated in the top 1/4 or 1/3 among their peers, the comp packages are blindly increasing as every new hire raises the bar…I guess we’ll have to get to that next time.