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CEO Bargaining Power and Compensation

Financial Review, volume 60, issue 3, 2025 [10.1111/fire.12437]

SMU Cox School of Business Research Paper No. 22-15

54 Pages Posted: 22 Jul 2022 Last revised: 18 Feb 2026

See all articles by Edward J Kim

Edward J Kim

Western Michigan University

Date Written: July 14, 2022

Abstract

I provide causal empirical evidence of how changes in the bargaining power of CEOs affect CEO compensation. Using the staggered rejections of previously adopted Inevitable Disclosure Doctrine (IDD) by US state courts to capture an exogenous increase in CEOs’ bargaining power, I find that the IDD rejection results in higher levels of CEO compensation. The effect is strongest in firms whose CEO-board dynamics is significantly influenced by the IDD – firms whose CEOs face greatest job mobility shock and firms that can effectively use the IDD decision as a bargaining tool against their CEOs.

Keywords: CEO Compensation, CEO Bargaining Power, CEO-Board Dynamics

JEL Classification: G34, G38, J33

Suggested Citation

Kim, Edward J, CEO Bargaining Power and Compensation (July 14, 2022). Financial Review, volume 60, issue 3, 2025 [10.1111/fire.12437], SMU Cox School of Business Research Paper No. 22-15, Available at SSRN: https://ssrn.com/abstract=4163168 or http://dx.doi.org/10.1111/fire.12437

Edward J Kim (Contact Author)

Western Michigan University ( email )

Kalamazoo, MI 49008
United States

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