CEO Power and the Structure of CEO Pay

33 Pages Posted: 30 Mar 2009 Last revised: 4 Oct 2014

See all articles by Chongwoo Choe

Chongwoo Choe

Monash University - Department of Economics

Gloria Yuan Tian

University of Lethbridge Calgary Campus; Financial Research Network (FIRN)

Xiangkang Yin

Deakin University; Financial Research Network (FIRN)

Date Written: October 3, 2014

Abstract

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.

Keywords: Managerial power, CEO pay, stock-based compensation

JEL Classification: D82, G32, J33

Suggested Citation

Choe, Chongwoo and Tian, Gloria Yuan and Yin, Xiangkang, CEO Power and the Structure of CEO Pay (October 3, 2014). International Review of Financial Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1361327 or http://dx.doi.org/10.2139/ssrn.1361327

Chongwoo Choe (Contact Author)

Monash University - Department of Economics ( email )

Department of Economics
PO Box 197
Caulfield East, Victoria 3145
Australia
+61 2 9903 1125 (Phone)
+61 2 9903 1128 (Fax)

Gloria Yuan Tian

University of Lethbridge Calgary Campus ( email )

6th floor, 345 - 6 Ave SE
Calgary, Alberta T2G 4V1
Canada

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Xiangkang Yin

Deakin University ( email )

Melbourne, Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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