CEO Power, Compensation, and Governance∗
نویسندگان
چکیده
This paper presents a contracting model of governance based on the premise that CEOs are the main promoters of governance change. CEOs use their power to extract higher pay or private benefits, and different governance structures are preferred by different CEOs as they favor one or the other type of compensation. The model explains why good countrywide investor protection breeds good firm governance and predicts a “race to the top” in firm-governance quality after the Sarbanes-Oxley Act. However, such governance changes may be associated with higher rather than lower CEO pay as CEOs substitute away from private benefits. The model also provides an explanation for the observed correlation of CEO pay and firm governance as driven by CEO power. JEL Classification: G34, J33, K00.
منابع مشابه
Board Compensation and Risk-Taking: The Moderating Role of CEO Duality (Evidence from Banking Industry)
The purpose of this paper is to explore relationship between board compensation and risk taking with regard to CEO duality in the banking industry. Using a panel data regression model, with regard to optimal contracting and managerial power theory, we examined the data to determine the relationship between board compensation and risk taking of twenty one banks, for the period 2012 to 2018. R...
متن کاملInsider Entrenchment and CEO Compensation in Entrepreneurial Firms: An Empirical Investigation
Insider Entrenchment and CEO Compensation in Entrepreneurial Firms: An Empirical Investigation By Arno Forst, Ph.D. A Dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Business at Virginia Commonwealth University. Virginia Commonwealth University, 2009 Chair: Dr. Benson Wier Professor, Department of Accounting This study investigates the...
متن کاملCEO power, ownership structure and pay performance in Chinese banking
This paper examines the determinants of executive compensation in Chinese banking during 2005–2012. Using the fixed effects panel, 2SLS and dynamic GMM regressions, I find that there is no significant positive pay performance relation, and CEO power does not necessarily exhibit higher levels of executive compensation. However, I show that ownership structure (measured by ownership concentration...
متن کاملCorporate Governance, Compensation Consultants, and CEO Pay Levels
This study investigates the relation between corporate governance and CEO pay levels and the extent to which the higher pay found in firms using compensation consultants is related to governance differences. Using proxy statement disclosures from 2,110 companies, we find that CEO pay is higher in firms with weaker governance and that firms with weaker governance are more likely to use compensat...
متن کامل1 Working Paper WP No 601 July , 2005 GOVERNANCE STRUCTURE AND THE WEIGHTING OF PERFORMANCE MEASURES IN CEO COMPENSATION
We empirically examine how governance structure affects the design of executive compensation contracts and, in particular, the implicit weights of firm performance measures in CEO compensation. We find that compensation contracts in firms with higher takeover protection and where the CEO has more influence on governance decisions put more weight on accounting-based measures of performance (retu...
متن کامل