The Effect of Labor Unions on CEO Compensation

56 Pages Posted: 22 Mar 2010 Last revised: 4 Jul 2016

See all articles by Qianqian Huang

Qianqian Huang

City University of Hong Kong

Feng Jiang

University at Buffalo - School of Management

Erik Lie

University of Iowa - Henry B. Tippie College of Business

Tingting Que

University of Iowa - Henry B. Tippie College of Business

Date Written: January 1, 2015

Abstract

We find evidence that labor unions affect CEO compensation. First, we find that firms with strong unions pay their CEOs less. The negative effect is robust to various tests for endogeneity, including cross-sectional variations and a regression discontinuity design. Second, we find that CEO compensation is curbed before union contract negotiations, especially when the compensation is discretionary and the unions have a strong bargaining position. Third, we report that curbing CEO compensation mitigates the chance of a labor strike, thus providing a rationale for firms to pay CEOs less when facing strong unions.

Keywords: Executive compensation, Labor union, Collective bargaining

JEL Classification: J52, M52

Suggested Citation

Huang, Qianqian and Jiang, Feng and Lie, Erik and Que, Tingting, The Effect of Labor Unions on CEO Compensation (January 1, 2015). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1571811 or http://dx.doi.org/10.2139/ssrn.1571811

Qianqian Huang

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
852-3442-0284 (Fax)

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Erik Lie (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Tingting Que

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States
3193530980 (Phone)

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