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Pay me Right: Reference Values and Executive Compensation

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  • Aleksandra GregoriÄ
  • SaÅ¡o Polanec
  • Sergeja SlapniÄ ar

Abstract

This paper examines the importance of reference values for executive compensation contracts. We rely on a quasi†experimental setting (the adoption of pay guidelines), and a well†defined measure of individual†specific reference values to provide evidence on how a change in CEO reference compensation leads to subsequent changes of actual pay. We find that executive compensation adjusts gradually towards the new reference values, and that the speed of the adjustment depends on the corporate governance characteristics: the firm ownership structure, the role of the State and of the employees in the firm decision making. These results provide empirical support for theoretical models of bargaining that take into account reference values.

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  • Aleksandra GregoriÄ & SaÅ¡o Polanec & Sergeja SlapniÄ ar, 2010. "Pay me Right: Reference Values and Executive Compensation," European Financial Management, European Financial Management Association, vol. 16(5), pages 778-804, November.
    • Handle: RePEc:bla:eufman:v:16:y:2010:i:5:p:778-804
    DOI: 10.1111/j.1468-036X.2010.00558.x
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    1. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2016. "Executive pay and performance in Portuguese listed companies," Research in International Business and Finance, Elsevier, vol. 37(C), pages 184-195.

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