Abstract

http://ssrn.com/abstract=94009
 
 

References (34)



 
 

Citations (890)



 
 

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Performance Pay and Top Management Incentives


Kevin J. Murphy


University of Southern California - Marshall School of Business; University of Southern California - Department of Economics; USC Gould School of Law

Michael C. Jensen


Harvard Business School; Social Science Electronic Publishing (SSEP), Inc.; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)


Michael C. Jensen, FOUNDATIONS OF ORGANIZATIONAL STRATEGY, Harvard University Press, 1998

Abstract:     
Our estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay and dismissal incentives, most CEOs hold trivial fractions of their firms' stock, and ownership levels have declined over the past 50 years. We hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. Declines in both the pay-performance relation and the level of CEO pay since the 1930s are consistent with this hypothesis.

Number of Pages in PDF File: 50

JEL Classification: G31, G32, J31, J33

Accepted Paper Series


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Date posted: March 8, 2001  

Suggested Citation

Murphy, Kevin J. and Jensen, Michael C., Performance Pay and Top Management Incentives. Michael C. Jensen, FOUNDATIONS OF ORGANIZATIONAL STRATEGY, Harvard University Press, 1998. Available at SSRN: http://ssrn.com/abstract=94009 or http://dx.doi.org/10.2139/ssrn.94009

Contact Information

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
3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
USC Gould School of Law
699 Exposition Boulevard
Los Angeles, CA 90089
United States

Michael C. Jensen (Contact Author)
Harvard Business School ( email )
Soldiers Field
Negotiations, Organizations & Markets
Boston, MA 02163
United States
617-510-3363 (Phone)
305-675-3166 (Fax)
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=6484
Social Science Electronic Publishing (SSEP), Inc. ( email )
7858 Sanderling Road
Sarasota, FL 34242
United States
617-510-3363 (Phone)
305 675-3166 (Fax)
HOME PAGE: http://ssrn.com/author=9

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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References:  34
Citations:  890
Footnotes:  2

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