CEO Power and the Structure of CEO Pay
Monash University - Department of Economics
Gloria Yuan Tian
University of Lethbridge Calgary Campus; Financial Research Network (FIRN)
La Trobe University - La Trobe Business School; Financial Research Network (FIRN)
October 3, 2014
International Review of Financial Analysis, Forthcoming
This paper fleshes out the rent extraction view of CEO compensation put forward by the managerial power theory (Bebchuk et al., 2002), and tests its main implications on the relation between CEO power and the structure of CEO pay. For a measure of CEO power most relevant to managerial power theory, we use the CEO pay slice due to Bebchuk et al. (2011). Based on the sample of S&P500 firms ovor the period of 1999-2008, we find that the implied relation between power and pay is largely supported. Our findings suggest that managerial power theory has relevance in explaining the relation between power and pay when the focus is on managerial bargaining power. Given the multiple dimensions of CEO power, however, the scope of power may need to be broadened for a better understanding of how managerial power affects firm performance.
Number of Pages in PDF File: 33
Keywords: Managerial power, CEO pay, stock-based compensation
JEL Classification: D82, G32, J33
Date posted: March 30, 2009 ; Last revised: October 4, 2014
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