The Pay for Performance Dilemma

24 Pages Posted: 1 Jun 2004

Date Written: May 2004


Empirical evidence from the United States indicates a statistically significant relationship - but not a particularly strong economic relationship - between the CEO's remuneration and corporate performance. In Australia, the limited number of studies in this field have found that CEO pay is related to company size (the larger the company, on average the higher the pay) but is not linked in any clear way to corporate performance. This article analyses the factors which may explain the lack of a strong link between executive pay and company performance in Australia. Some of these are consistent with the board-capture theory articulated by Bebchuk and Fried.

Keywords: corporate governance, executive compensation

JEL Classification: G34, J33

Suggested Citation

Stapledon, Geofrey P., The Pay for Performance Dilemma (May 2004). Available at SSRN: or

Geofrey P. Stapledon (Contact Author)

University of Melbourne - Law School ( email )

Victoria 3010
+61 3 8344 8916 (Phone)
+61 3 8344 9971 (Fax)

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