Technological Change, Job Tasks, and CEO Pay

64 Pages Posted: 4 Dec 2013

See all articles by Jason D. Kotter

Jason D. Kotter

Brigham Young University - Department of Finance

Date Written: November 27, 2013

Abstract

This paper examines how changes in the composition of the human capital of the workforce impact the CEO. Over the last fifty years, technological change has caused the tasks workers perform to shift from routine to nonroutine work. I estimate that these changes in the workforce caused CEO pay to double over the last thirty years, explaining roughly one-third of the aggregate increase in CEO pay. Consistent with this effect being caused by synergies between CEOs and nonroutine workers, I use text analysis of 10-K statements to show that managers of nonroutine workforces focus relatively more on employees and that this focus leads to large increases in firm value and profitability. Together, these results suggest that a substantial portion of the increase in CEO pay over the past three decades represents an optimal response to technological change.

Keywords: executive compensation, CEO pay, skill-biased technological change, human capital

JEL Classification: G30, J24, J33, M12

Suggested Citation

Kotter, Jason D., Technological Change, Job Tasks, and CEO Pay (November 27, 2013). Available at SSRN: https://ssrn.com/abstract=2362359 or http://dx.doi.org/10.2139/ssrn.2362359

Jason D. Kotter (Contact Author)

Brigham Young University - Department of Finance ( email )

United States

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