Is Pay a Matter of Values?
Renee B. Adams
University of New South Wales, Department of Banking and Finance; ECGI; FIRN; ABFER
Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance
Public outrage over executive compensation reached an all time high during the financial crisis. Around the world, many argued that CEOs and boards were immoral in setting their pay and pressured governments to impose restrictions on executive pay. Using a unique sample of data on human values for CEOs, we show that CEOs and directors have different values than general members of the population. CEOs and directors place more emphasis on power and achievement values than members of the population and they emphasize self-direction values more. However, values appear to have little explanatory power for pay, in contrast to economic variables. While some CEOs may be unethical in setting their pay, our results suggest that pay is not a matter of values on average.
Number of Pages in PDF File: 49
Keywords: Executive compensation, internal firm governance, labor market, culture
JEL Classification: G3, J33
Date posted: January 11, 2010 ; Last revised: July 23, 2012