Executive pay continues to attract much attention from investors, financial economists, regulators, the media, and the public at large. The dominant paradigm for economists’ study of executive compensation has long been that pay arrangements are the product of arm’s-length bargaining—bargaining between executives attempting to get the best possible deal for themselves and boards seeking only to serve shareholder interests. According to this “official story,” directors can be counted on to act as guardians of shareholders’ interests. This assumption has also been the basis for corporate rules governing compensation in publicly traded firms.