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The Implications of Firm and Individual Characteristics on CEO Pay

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  • McKnight, Phillip
  • Tomkins, Cyril

Abstract

This study examines both the direct and indirect effects of chief executive officer tenure and age on CEO pay in UK organizations. It was found that the positive relationship between shareholder return and increases in the value of executive options held decreases with CEO tenure. Moreover, the positive association between changes in salary and sales was found to increase with CEO tenure. CEO age, on the other hand, weakened the relationship between the level in salary and size of the organization. Several new methodological issues relating to research on executive pay are also raised. One finding was that the study of these relationships might be better pursued through the use of non-linear functions as CEO influence over the pay setting process may not become significant until about the sixth year of tenure. These findings have implications for further research relating to executive pay and to the corporate governance process.

Suggested Citation

  • McKnight, Phillip & Tomkins, Cyril, 2004. "The Implications of Firm and Individual Characteristics on CEO Pay," European Management Journal, Elsevier, vol. 22(1), pages 27-40, February.
    • Handle: RePEc:eee:eurman:v:22:y:2004:i:1:p:27-40
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    Citations

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    Cited by:

    1. Kulich, C. & Trojanowski, G. & Ryan, M. & Haslam, S.A. & Renneboog, L.D.R., 2010. "Who gets the Carrot and Who gets the Stick? Evidence of Gender Disparities in Executive Remuneration," Other publications TiSEM 52bce888-01d5-48a7-a674-0, Tilburg University, School of Economics and Management.
    2. Schmid, Stefan & Altfeld, Frederic, 2018. "International work experience and compensation: Is more always better for CFOs?," European Management Journal, Elsevier, vol. 36(4), pages 530-543.
    3. Kai Jäger, 2013. "Sources of Franco-German corporate support for the euro: The effects of business network centrality and political connections," European Union Politics, , vol. 14(1), pages 115-139, March.
    4. Pamela Kent & Kim Kercher & James Routledge, 2018. "Remuneration committees, shareholder dissent on CEO pay and the CEO pay–performance link," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(2), pages 445-475, June.
    5. Schmid, Stefan & Altfeld, Frederic & Dauth, Tobias, 2018. "Americanization as a driver of CEO pay in Europe: The moderating role of CEO power," Journal of World Business, Elsevier, vol. 53(4), pages 433-451.
    6. Michaela Rankin, 2010. "Structure and Level of Remuneration Across the Top Executive Team," Australian Accounting Review, CPA Australia, vol. 20(3), pages 241-255, September.
    7. Kai Jäger, 2017. "Studies on Issues in Political Economy since the Global Financial Crisis," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 71.
    8. Stefan Schmid & Sebastian Baldermann, 2021. "CEOs’ International Work Experience and Compensation," Management International Review, Springer, vol. 61(3), pages 313-364, June.

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