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CEO compensation strategies: consequences on the structure and Management of Executive Pay

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Author Info

  • TREPO, Georges
  • EL AKREMI, Assaad

    (Institut Supérieur de Gestion, Tunis University)

  • ROUSSEL, Patrice

    (Toulouse University)

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    Abstract

    The aim of this research is to study compensation strategies for Chief Executive Officers (CEO) from various economic, political and symbolic perspectives. A theoretical model was developed to study the hypothetical influence of several phenomena suggested by theoretical work on executive compensation. An empirical study was carried out in France on a sample of 106 chief executives from firms amongst the top 700 rated by sales. A structural equation model was tested using Lisrel. The results suggest that agency theory offers a priori the most solid explanation of CEO compensation because of the links observed between the control exercised by the Principal, the intensity of short-term incentives and the sensitivity of direct pay to performance. A detailed analysis of the results also seems to provide substantial support for political and symbolic perspectives. The balance of power between board members and top executives seems to be a determining factor in the determination of the structure and management of CEO compensation. The results of the research suggest that the political perspective remains coherent with agency theory by supposing that CEOs can be tempted to make use of their privileged position concerning compensation decisions.

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    Bibliographic Info

    Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 741.

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    Length: 35 pages
    Date of creation: 01 Oct 2001
    Date of revision:
    Handle: RePEc:ebg:heccah:0741

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    Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
    Web page: http://www.hec.fr/
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    Related research

    Keywords: CEO; compensation strategies; structure and management of executive pay; economic power; political power; symbolic perspectives; agency theory;

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