CEO Compensation

43 Pages Posted: 15 Dec 2010

See all articles by Carola Frydman

Carola Frydman

Northwestern University; National Bureau of Economic Research (NBER)

Dirk Jenter

London School of Economics & Political Science (LSE) - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 4 versions of this paper

Date Written: December 13, 2010

Abstract

This paper surveys the recent literature on CEO compensation. The rapid rise in CEO pay over the past 30 years has sparked an intense debate about the nature of the pay-setting process. Many view the high level of CEO compensation as the result of powerful managers setting their own pay. Others interpret high pay as the result of optimal contracting in a competitive market for managerial talent. We describe and discuss the empirical evidence on the evolution of CEO pay and on the relationship between pay and firm performance since the 1930s. Our review suggests that both managerial power and competitive market forces are important determinants of CEO pay, but that neither approach is fully consistent with the available evidence. We briefly discuss promising directions for future research.

Keywords: executive compensation, managerial incentives, incentive compensation, equity compensation, option compensation, corporate governance

JEL Classification: D20, G30, J30, J31, J33, J41, M52

Suggested Citation

Frydman, Carola and Jenter, Dirk, CEO Compensation (December 13, 2010). CESifo Working Paper Series No. 3277, Available at SSRN: https://ssrn.com/abstract=1724591 or http://dx.doi.org/10.2139/ssrn.1724591

Carola Frydman

Northwestern University ( email )

2211 Campus Drive
Room 4383
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dirk Jenter (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/jenter/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
463
Abstract Views
2,836
Rank
2,232
PlumX Metrics