CEO Influence and Executive Compensation
Uma V. Sridharan
FINANCIAL REVIEW, February, 1996
The sales-maximization hypothesis and the shareholder wealth-maximization hypothesis have been suggested in prior finance literature to explain the determinants of CEO pay. This paper proposes that CEO influence over the board is an additional explanation for the size of CEO pay. Evidence from the 1989-1991 period indicates that CEO pay is positively related to measures of CEO influence over the board. Results of this study suggest that CEO salary levels are mostly a function of CEO influence over the board, the growth in sales and the size of the firm.
JEL Classification: J33Accepted Paper Series
Date posted: July 3, 1998
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