There’s certainly plenty of populist concern about C.E.O. pay, perhaps because the average big-company C.E.O. now makes more than three hundred times what the average worker makes. But the S.E.C.’s commissioners (three of whom are conservative Republicans) came up with the new rules [making CEO pay more transparent to investers] not because workers care about how much C.E.O.s make but because shareholders do.

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In part, executive compensation matters to investors because executives now take so much money out of corporations every year. According to the economists Lucian Bebchuk and Yaniv Grinstein, between 1993 and 2003 the top five executives at fifteen hundred companies in the U.S. were paid three hundred and fifty billion dollars.

More important, it’s becoming increasingly clear that, from a shareholder’s perspective, overpaid C.E.O.s aren’t just expensive; they’re downright destructive. One recent study of the market between 1992 and 2001 by economists at Rutgers and Penn State found that the more a C.E.O. was paid, relative to his peers, the more likely his company was to underperform in the stock market. The economist David Yermack, of N.Y.U., has found that companies that allow their C.E.O.s to use corporate jets for personal reasons fall short of market benchmarks by four per cent annually. There are myriad ways in which excessive or poorly designed pay packages can do damage. “Golden parachutes,” which guarantee executives huge payoffs if their companies are acquired, may encourage them to sell out even when the company would be better off remaining independent. Conversely, according to a study by the finance professors Jarrad Harford and Kai Li, very highly paid executives are more likely than their peers to make acquisitions, and to receive major financial rewards for doing so, even when the acquisition ends up destroying corporate value. And there is evidence that overpaid C.E.O.s are more likely to commit fraud that props up stock prices—perhaps because the more you have to gain from criminal activity, the more likely you are to engage in it.

This doesn’t mean that all lucrative pay packages are a waste of money. But, more and more, big investors are treating excess compensation as a reliable index that something serious may be wrong. In particular, it’s often a sign that a company’s board of directors is catering to the C.E.O.’s whims rather than supervising him. While the S.E.C.’s new rules won’t solve the problem of weak boards or overweening C.E.O.s, they will make it easier for investors to figure out exactly who is being paid what, and to make an informed decision about whether to buy or sell a stock.