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


  • Fabienne Llense


In the middle of the nineties, the sharp increase in globalisation 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 extend such a model could explain the observed CEO compensations. The size elasticity of compensation in France is equal to 0.5 and justifies a large magnitude in compensation. To moderate those compensations, a wage cap is often called for by opinion and the European left but also, more surprisingly, by representative of shareholders. The cost of this policy is evaluated in this sorting model and the lobbying of shareholders is explained.

Suggested Citation

  • Fabienne Llense, 2008. "French CEO Compensations: What is the Cost of a Mandatory Upper Limit?," CESifo Working Paper Series 2402, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2402

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    References listed on IDEAS

    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. Thanassoulis, John, 2014. "Bank pay caps, bank risk, and macroprudential regulation," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 139-151.
    2. Albuquerque, Rui & Cabral, Luis & Guedes, Jose, 2016. "Relative Performance, Banker Compensation, and Systemic Risk," CEPR Discussion Papers 11693, C.E.P.R. Discussion Papers.
    3. Roberto Barontini & Stefano Bozzi, 2011. "Board compensation and ownership structure: empirical evidence for Italian listed companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(1), pages 59-89, February.
    4. Dittmann, Ingolf & Maug, Ernst & Zhang, Dan, 2011. "Restricting CEO pay," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1200-1220, September.
    5. 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.
    6. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
    7. Carola Frydman, 2008. "Learning from the Past: Trends in Executive Compensation over the Twentieth Century," CESifo Working Paper Series 2460, CESifo Group Munich.
    8. Kentaro Asai, 2016. "Is Capping Executive Bonuses Useful?," IMF Working Papers 16/196, International Monetary Fund.
    9. Karanassou, Marika & Sala, Hector, 2010. "The Wage-Productivity Gap Revisited: Is the Labour Share Neutral to Employment?," IZA Discussion Papers 5092, Institute for the Study of Labor (IZA).
    10. 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.
    11. Gersbach, Hans & Schmutzler, Armin, 2014. "Does globalization create superstars? A simple theory of managerial wages," European Economic Review, Elsevier, vol. 71(C), pages 34-51.
    12. Frédéric TEULON, 2014. "CEO compensation and topmanagement incentives. Internal or social problems ?," Working Papers 2014-187, Department of Research, Ipag Business School.
    13. John Thanassoulis, 2011. "The Case For Intervening In Bankers' Pay," Economics Series Working Papers 532, University of Oxford, Department of Economics.

    More about this item

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods


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