CEO pay. A study of the pay of corporate chief executive

QUESTION:

CEO pay. A study of the pay of corporate chief executive officers (CEOs) examined the increase in cash compensation of the CEOs of 104 companies, adjusted for inflation, in a recent year. The mean increase in real compensation was x 6.9%, and the standard deviation of the increases was s 55%. Is this good evidence that the mean real compensation m of all CEOs increased that year? The hypotheses are H0: m 0 1no increase2 Ha: m 0 1an increase2 Because the sample size is large, the sample s is close to the population s, so take s 55%. (a) Sketch the Normal curve for the sampling distribution of x when H0 is true. Shade the area that represents the P-value for the observed outcome x 6.9%. (b) Calculate the P-value. (c) Is the result significant at the a 0.05 level? Do you think the study gives strong evidence that the mean compensation of all CEOs went up? 6.13