# Papers explaining Roberts's law

Notes: Left panel: The CEO compensation is the ex ante one, including Black–Scholes value of options granted. The slope is about 1/3, a reflection of Roberts’s law: $Pay$~$Size^b$ with b ≃ 1/3. Right panel: The pay–performance sensitivity (PPS) is the Jensen–Murphy measure: by how many dollars does the CEO wealth change, for a given dollar change in firm value. The slope is about −2/3, so that PPS ~ Sizeb−1 with b ≃ 1/3. The congruence between the scalings is predicted by the Edmans, Gabaix, Landier (2009) model.