IDEAS home Printed from https://ideas.repec.org/p/cra/wpaper/2010-14.html
   My bibliography  Save this paper

The Rise in Executive Compensation - Consequence of a 'War for Talents'?

Author

Listed:
  • Katja Rost

Abstract

The rise in executive compensation has triggered a great amount of public controversy and academic research. Critics have referred to the salaries paid to managers as 'pay without performance', while defenders have countered that the large salaries can be explained by a 'war for talents'. This research tests whether a war for talent provides an explanation. The rise in executive compensation in recent years is explained by the assumption that, over the past decades, general managerial skills have become more important relative to firm-specific knowledge for the production of managers. A shift toward transferable managerial skills requires higher compensation, particularly in large firms, to attract and retain managerial talents. Relying on an internationalized and deregulated managerial labor market, i.e. the Swiss banking sector, the empirical findings confirm that a shift toward transferable managerial skills in large firms is indeed an explanation for the rise in executive compensation. However, the shift towards transferable managerial skills in large firms does not improve firm performance, giving no supporting evidence for a war for talent. It is discussed how transferable managerial skills may used to legitimize higher compensation at the top, e.g. by promulgating definitions of talent in elite labour markets.

Suggested Citation

  • Katja Rost, 2010. "The Rise in Executive Compensation - Consequence of a 'War for Talents'?," CREMA Working Paper Series 2010-14, Center for Research in Economics, Management and the Arts (CREMA).
  • Handle: RePEc:cra:wpaper:2010-14
    as

    Download full text from publisher

    File URL: http://www.crema-research.ch/papers/2010-14.pdf
    File Function: Full Text
    Download Restriction: no

    File URL: http://www.crema-research.ch/abstracts/2010-14.htm
    File Function: Abstract
    Download Restriction: no

    More about this item

    Keywords

    Executive compensation; efficient labor market view; transferable skills; outside options;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cra:wpaper:2010-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna-Lea Werlen). General contact details of provider: http://edirc.repec.org/data/cremach.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.