Why Do Firms Offer CEOs Perks?

Why are perks persistent and widespread in CEO compensation despite public scrutiny, and why do they grow faster than wages with firm size? This paper develops an equilibrium matching model to analyze the joint determination of CEO wages and perks in a competitive labor market. By incorporating cost structures, utility complementarities, and the productivity-enhancing nature of perks, the model explains their value to firms and firm-size sensitivity. Empirical evidence from S&P 500 firms reveals economies of scale in providing perks and the differing sensitivities of productivity-related and non-productivity-related perks, highlighting their nuanced nature and strategic role in CEO compensation.

Keywords: perks, executive compensation, private benefits, competitive CEO market, productivity-related perks JEL Classifications: C78, J33, G30 perks, executive compensation, private benefits, competitive CEO market, productivity-related perks JEL Classifications: C78, J33, G30

Suggested Citation: Suggested Citation

Qiu, Jiaping and Han, Seungjin and Carrothers, Andrew Glen and Yang, Zi, Why Do Firms Offer CEOs Perks? (January 01, 2025). Available at SSRN: https://ssrn.com/abstract=5169085 or http://dx.doi.org/10.2139/ssrn.5169085