The article by Michael C. Jensen and Kevin J. Murphy, published in *The Journal of Political Economy*, examines the relationship between CEO pay and firm performance. The authors estimate that a $1,000 change in shareholder wealth corresponds to a $3.25 change in CEO wealth, including salary, bonuses, stock options, and dismissal incentives. They find that while stock ownership provides significant incentives, most CEOs hold only a trivial fraction of their firm's stock, and ownership levels have declined over the past 50 years. The authors hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. They also note that the decline in both the pay-performance relation and CEO pay since the 1930s supports this hypothesis. The study suggests that the conflict of interest between shareholders and CEOs is not fully resolved by compensation policies, and that political forces play a significant role in regulating executive compensation.The article by Michael C. Jensen and Kevin J. Murphy, published in *The Journal of Political Economy*, examines the relationship between CEO pay and firm performance. The authors estimate that a $1,000 change in shareholder wealth corresponds to a $3.25 change in CEO wealth, including salary, bonuses, stock options, and dismissal incentives. They find that while stock ownership provides significant incentives, most CEOs hold only a trivial fraction of their firm's stock, and ownership levels have declined over the past 50 years. The authors hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. They also note that the decline in both the pay-performance relation and CEO pay since the 1930s supports this hypothesis. The study suggests that the conflict of interest between shareholders and CEOs is not fully resolved by compensation policies, and that political forces play a significant role in regulating executive compensation.