Pay Me Right: Reference Values and Executive Compensation

Katholieke Universiteit Leuven, LICOS Discussion Paper No. 220/2008

26 Pages Posted: 18 Mar 2009

See all articles by Aleksandra Gregoric

Aleksandra Gregoric

Copenhagen Business School

Saao Polanec

University of Ljubljana - Faculty of Economics

Sergeja Slapničar

University of Queensland, Business School; University of Ljubljana - Faculty of Economics

Date Written: November 1, 2008

Abstract

This paper studies the impact of external reference values on managerial compensation contracts. We consider the effect of adoption of non-binding pay norms on actual remuneration behavior using a unique country example. We find that introduction of pay norms changed the reference values for CEOs and led to adjustment of executive compensation towards new equilibrium. These pay norms affected pay in firms with actual compensation below and above reference values. Further we find that reference values changed compensation in all types of firms, although executive compensation increased more in firms with more dispersed ownership and control. These results confirm the importance of reference values in bargaining process between owners and managers.

Keywords: Executive compensation, bargaining, reference values, ownership structure

JEL Classification: G30, G34

Suggested Citation

Gregoric, Aleksandra and Polanec, Saso and Slapničar, Sergeja and Slapničar, Sergeja, Pay Me Right: Reference Values and Executive Compensation (November 1, 2008). Katholieke Universiteit Leuven, LICOS Discussion Paper No. 220/2008, Available at SSRN: https://ssrn.com/abstract=1361540 or http://dx.doi.org/10.2139/ssrn.1361540

Aleksandra Gregoric (Contact Author)

Copenhagen Business School ( email )

Porcelænshaven 24
Frederiksberg C, DK - 2000
Denmark

Saso Polanec

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Sergeja Slapničar

University of Queensland, Business School ( email )

Brisbane, Queensland 4072
Australia

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
30
Abstract Views
674
PlumX Metrics