Managerial Power and Compensation

University of Zurich, Working Paper No. 28

12 Pages Posted: 18 Feb 2000

See all articles by Bruno S. Frey

Bruno S. Frey

CREMA; University of Basel

Marcel Kucher

University of Zurich - Department of Economics

Date Written: September 1, 1999

Abstract

According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation.

JEL Classification: A12, J31, M12

Suggested Citation

Frey, Bruno S. and Kucher, Marcel, Managerial Power and Compensation (September 1, 1999). University of Zurich, Working Paper No. 28. Available at SSRN: https://ssrn.com/abstract=203331 or http://dx.doi.org/10.2139/ssrn.203331

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

Marcel Kucher (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland
+41 1 634 37 32 (Phone)
+41 1 634 49 07 (Fax)

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