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CEO Compensation: Too Much is not Enough !

Author

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  • Laurent Weill

    (Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg)

Abstract

This paper conducts an analysis of the relationship between CEO compensation and managerial performance on a large panel of US public firms, by taking into account the different components of CEO compensation. We estimate a stochastic frontier model in which managerial performance is related to compensation components. We find a positive and significant influence of CEO compensation on managerial performance, with a differentiated impact for components of compensation. We show that increases in salary, bonus, and options grants tend to enhance managerial performance. Our findings tend therefore to support the view that compensation contracts can be designed to increase managerial performance.

Suggested Citation

  • Laurent Weill, 2009. "CEO Compensation: Too Much is not Enough !," Working Papers of LaRGE Research Center 2009-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2009-03
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    More about this item

    Keywords

    Executive compensation; corporate governance; stochastic frontier.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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