The effects of ownership structure on conditions at the top: The case of CEO pay raises

Donald C. Hambrick · Sydney David Finkelstein

361 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance Human Resource and Talent Management Family Business Performance and Succession

Abstract

Abstract We examine how ownership configuration affects the determination of CEO pay raises. Based on a sample of 188 firms over a 5‐year period, it was found that pay raises were based on distinctly different factors, depending on the ownership profile of the firm. In management‐controlled firms—where no single major owner exists—results suggest an overarching pay philosophy: maximize CEO pay, subject to demonstration of face legitimacy of that pay. In externally‐controlled firms—where a major (nonmanager) owner exists—results suggest a very different philosophy: minimize CEO pay, subject to the ability to attract/retain a satisfactory CEO.

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References

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