Determinants of Chief Executive Officer Compensation

John R. Deckop

218 citations0/0 files storedIndustrial and Labor Relations Review

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Abstract

This study investigates correlates of Chief Executive Officer (CEO) compensation, with particular emphasis on measures of firm performance. An analysis of data from 120 firms in 1977–81 shows that, contrary to the findings of some other studies, CEOs were not given an incentive through compensation to increase the size of the firm at the expense of profit. Rather, CEO compensation was positively related to profit as a percentage of sales. Also, CEOs recruited from outside the firm earned significantly more than internally promoted CEOs, and both of those groups earned significantly more than CEOs who were founders of the firm. The market equity value of the firm and the CEO's age and years of service as a CEO had little effect on compensation.

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References

1986The theory and practice of econometrics 1933The Modern Corporation and Private Property 1987MANAGERIAL CONTROL, PERFORMANCE, AND EXECUTIVE COMPENSATION.1970Managerial Pay and Corporate Performance 1980The Determinants of Executive Salaries: An Econometric Survey

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