Abstract

http://ssrn.com/abstract=1948531
 
 

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Executive Compensation, Fat Cats and Best Athletes


Jerry Kim


Columbia Business School - Management

Bruce Kogut


Columbia Business School - Management

Jae-Suk Yang


Columbia University - Columbia Business School

April 11, 2013

Columbia Business School Research Paper
Forthcoming in American Sociological Review

Abstract:     
The income gains in the top 1 percent are the primary cause for the rapid growth in U.S. inequality since the late 1970s. Managers and executives of firms account for a large proportion of these top earners. Chief executive officers (CEOs) in particular have seen their compensation increase faster than the growth in firm size. We propose that changes in the macro patterns of the distribution of CEO compensation resulted from a process of diffusion within localized networks, propagating higher pay among corporate executives. We compare three candidate explanations for diffusion: director board interlocks, peer groups, and educational networks. The statistical results indicate that corporate director networks facilitate social comparisons that generate the observed pay patterns. Peer and education network effects do not survive a novel endogeneity test that we propose and estimate. A key implication is that local diffusion through executive network structures explains the changes in the macro patterns of income distribution evidenced in the inequality data.

Number of Pages in PDF File: 65

Keywords: Executive Compensation, Social Comparison, Social Networks, Endogeneity, Chief Executive Officers, Income Distribution

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Date posted: October 24, 2011 ; Last revised: November 19, 2014

Suggested Citation

Kim, Jerry and Kogut, Bruce and Yang, Jae-Suk, Executive Compensation, Fat Cats and Best Athletes (April 11, 2013). Forthcoming in American Sociological Review. Available at SSRN: http://ssrn.com/abstract=1948531 or http://dx.doi.org/10.2139/ssrn.1948531

Contact Information

Jerry Kim (Contact Author)
Columbia Business School - Management ( email )
3022 Broadway
New York, NY 10027
United States

Bruce Kogut
Columbia Business School - Management ( email )
3022 Broadway
New York, NY 10027
United States

Jae-Suk Yang
Columbia University - Columbia Business School ( email )
3022 Broadway
New York, NY New York 10027
United States
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