The Effect of Labor Unions on CEO Compensation
56 Pages Posted: 22 Mar 2010 Last revised: 4 Jul 2016
Date Written: January 1, 2015
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: Suggested Citation