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French CEOs' Compensations: What is the Cost of a Mandatory Upper Limit?

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  • Fabienne Llense

Abstract

In the middle of the 90s, the sharp increase in globalization and the last privatization wave have promoted the shaping of a market for executives in France. Characteristics of this market are estimated for France and a competitive model is simulated in order to assess to what extent such a model can reproduce the observed chief executive officer (CEO) compensations. The size elasticity of CEOs' compensations in France is equal to 0.5 and justifies a large magnitude in compensations. To moderate these compensations, a wage cap is often called for not only by opinion and the European Left but also, more surprisingly, by representatives of shareholders. The cost of this policy is evaluated in this job assignement model and the lobbying of shareholders is investigated and explained above some thresholds. (JEL codes: J31, J33, D33, D41) Copyright The Author 2010. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

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Bibliographic Info

Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 56 (2010)
Issue (Month): 2 (June)
Pages: 165-191

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Handle: RePEc:oup:cesifo:v:56:y:2010:i:2:p:165-191

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  1. Robert M. Costrell & Glenn C. Loury, 2004. "Distribution of Ability and Earnings in a Hierarchical Job Assignment Model," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1322-1363, December.
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Cited by:
  1. Marika Karanassou & Hector Sala, 2011. "Inequality and Employment Sensitivities to the Falling Labour Share," Working Papers 680, Queen Mary, University of London, School of Economics and Finance.
  2. Marika Karanassou & Hector Sala, 2010. "The Wage-Productivity Gap Revisited: Is the Labour Share Neutral to Employment?," Working Papers wpdea1006, Department of Applied Economics at Universitat Autonoma of Barcelona.
  3. Edmans, Alex & Gabaix, Xavier, 2010. "Risk and the CEO Market: Why Do Some Large Firms Hire Highly-Paid, Low-Talent CEOs?," CEPR Discussion Papers 7836, C.E.P.R. Discussion Papers.
  4. Schmutzler, Armin & Gersbach, Hans, 2013. "Does globalization create superstars? A simple theory of managerial wages," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79804, Verein für Socialpolitik / German Economic Association.
  5. Carola Frydman, 2008. "Learning from the Past: Trends in Executive Compensation over the Twentieth Century," CESifo Working Paper Series 2460, CESifo Group Munich.
  6. Edmans, Alex & Gabaix, Xavier, 2010. "Risk and CEO Market: Why Do Some Large Firms Hire Highly-Paid, Low-Talent CEOs?," Working Papers 10-17, University of Pennsylvania, Wharton School, Weiss Center.
  7. Frédéric TEULON, 2014. "CEO compensation and topmanagement incentives. Internal or social problems ?," Working Papers 2014-187, Department of Research, Ipag Business School.
  8. John Thanassoulis, 2011. "The Case For Intervening In Bankers' Pay," Economics Series Working Papers 532, University of Oxford, Department of Economics.
  9. Roberto Barontini & Stefano Bozzi, 2011. "Board compensation and ownership structure: empirical evidence for Italian listed companies," Journal of Management and Governance, Springer, vol. 15(1), pages 59-89, February.
  10. John Thanassoulis, 2012. "Bank Pay Caps, Bank Risk, and Macroprudential Regulation," Economics Series Working Papers 636, University of Oxford, Department of Economics.

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