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http://ssrn.com/abstract=1136398
 
 

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Distributive Justice and CEO Compensation


Guillermina Jasso


New York University (NYU) - Department of Sociology; Institute for the Study of Labor (IZA)

Eva M. Meyersson Milgrom


Stanford Institute for Economic Policy Research (SIEPR); Stanford University - Department of Sociology

December 2007

IZA Working Paper No. 3236

Abstract:     
This paper develops a framework for studying individuals' ideas about what constitutes just compensation for chief executive officers (CEOs) and reports estimates of just CEO pay and the principles guiding ideas of justice. The sample consists of students pursuing a Master of Business Administration (MBA) degree in Sweden and the United States. The framework, based on justice theory and making use of Rossi's factorial survey method, enables assessment of ideas of fairness in CEO compensation, including (1) the just CEO compensation, in the eyes of each observer; (2) the principles of microjustice observers' ideas about "who should get what" based on characteristics of CEOs and their firms; and (3) principles of macrojustice ideas about the just level and dispersion in compensation across all CEOs. Our estimates yield the following main results: First, there is broad agreement on the median just CEO compensation but substantial inter-individual variation in the principles of microjustice and the other principles of macrojustice. Second, there is remarkable similarity in the distributions of the principles of microjustice and macrojustice across the MBA groups. Other important results include a pervasive gender attentiveness among MBA students and tolerance for large variability in CEO pay.

Number of Pages in PDF File: 37

Keywords: justice theory, fairness, CEO compensation, factorial survey method, MBA students, gender, inequality, Gini coefficient, Atkinson measure, Theil's inequality measures

JEL Classification: D31, D6, D8, G30, I3, J16, J31, J33, M14, M52

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Date posted: May 23, 2008  

Suggested Citation

Jasso, Guillermina and Meyersson Milgrom, Eva M., Distributive Justice and CEO Compensation (December 2007). IZA Working Paper No. 3236. Available at SSRN: http://ssrn.com/abstract=1136398 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Contact Information

Guillermina Jasso (Contact Author)
New York University (NYU) - Department of Sociology ( email )
295 Lafayette Street, 4th Floor
New York, NY 10012-9605
United States
212-998-8368 (Phone)
212-995-4140 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Eva Meyersson Milgrom
Stanford Institute for Economic Policy Research (SIEPR) ( email )
579 Serra Mall at Galvez St.
Stanford, CA 94305-6015
United States
Stanford University - Department of Sociology ( email )
Stanford, CA 94305
United States
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