How Internal Transaction costs drive compensation schemes
AbstractThe literature on chief executive officers (CEOs) established that economics and sociological rationales are both essential to understand the level and structure of CEOs' compensation. Our thesis is that internal "transaction costs" or frictions override strictly economic criteria to determine pay levels and pay structures. We study mid-level jobs that have features strikingly similar to the CEO. We show that pay checks and their underlying structure follow counterintuitive patterns, as if the employer resorts to a third party (i.e. the customer base) to reduce employee discontent over pay. We also find that firms reward managers as if they have considerable value added.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 802.
Length: 41 pages
Date of creation: 01 Oct 2004
Date of revision:
internal transaction costs; compensation; CEO;
Find related papers by JEL classification:
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
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