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The Pay Divide: (Why) are U.S. Top Executives Paid More?

Nuno G. Fernandes
IMD International; European Corporate Governance Institute (ECGI); Universidade Católica Portuguesa

Miguel A. Ferreira
Universidade Nova de Lisboa; European Corporate Governance Institute (ECGI)

Pedro P. Matos
USC Marshall School of Business

Kevin J. Murphy
University of Southern California - Marshall School of Business; University of Southern California - Department of Economics; USC Gould School of Law

June 29, 2009

EFA 2009 Bergen Meetings Paper
ECGI - Finance Working Paper No. 255/2009

Abstract:
We use new data from recently expanded disclosure rules to analyze the level and structure of compensation for CEOs in 27 countries. We show that U.S. CEOs earn more than their foreign counterparts. The U.S. “pay premium” is explained by differences in firm, industry, and governance characteristics, and the intensive use of incentive compensation in U.S. firms, which in turn seems related to strong legal enforcement and security-market regulation. In addition, we document that CEO pay worldwide is converging to U.S. levels as the premium was sharply reduced from 2000 to 2006.

Keywords: Executive pay, International pay differences, Corporate governance

JEL Classifications: G32, G34, G38

Working Paper Series

Date posted: February 12, 2009 ; Last revised: March 16, 2010

Suggested Citation

Fernandes, Nuno G., Ferreira, Miguel A., Matos, Pedro P. and Murphy, Kevin J., The Pay Divide: (Why) are U.S. Top Executives Paid More? (June 29, 2009). EFA 2009 Bergen Meetings Paper; ECGI - Finance Working Paper No. 255/2009. Available at SSRN: http://ssrn.com/abstract=1341639

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Contact Information

Nuno Goncalves Gracias Fernandes (Contact Author) IMD International ( email ) Ch. de Bellerive 23 P.O. Box 915 CH-1001 Lausanne Switzerland
European Corporate Governance Institute (ECGI) c/o ECARES ULB CP 114 B-1050 Brussels Belgium
Universidade Católica Portuguesa Palma de Cima Lisboa 1649-023 Portugal +351 217214270 (Phone) HOME PAGE: http://www.fcee.ucp.pt/docentes/url/nfernandes/
Miguel Almeida Ferreira Universidade Nova de Lisboa ( email ) Faculdade de Economia Campus de Campolide Lisboa 1099-032 Portugal HOME PAGE: http://docentes.fe.unl.pt/~mferreira
European Corporate Governance Institute (ECGI) ( email ) c/o ECARES ULB CP 114 B-1050 Brussels Belgium
Pedro Matos USC Marshall School of Business ( email ) Marshall School of Business Los Angeles, CA 90089 United States
Kevin J. Murphy University of Southern California - Marshall School of Business ( email ) BRI 308, MC 0804 Los Angeles, CA 90089-0804 United States 213-740-6553 (Phone) 213-740-6650 (Fax)
University of Southern California - Department of Economics ( email ) Los Angeles, CA 90089 United States
USC Gould School of Law ( email ) 699 Exposition Boulevard Los Angeles, CA 90089 United States