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

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  • Fabienne Llense

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

n the middle of the 90s, the sharp increase in globalization 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 extent such a model can reproduce the observed chief executive officer (CEO) compensations. The size elasticity of CEOs' compensations in France is equal to 0.5 and justifies a large magnitude in compensations. To moderate these compensations, a wage cap is often called for not only by opinion and the European Left but also, more surprisingly, by representatives of shareholders. The cost of this policy is evaluated in this job assignement model and the lobbying of shareholders is investigated and explained above some thresholds.

Suggested Citation

  • Fabienne Llense, 2010. "French CEOs' Compensations: What is the Cost of a Mandatory Upper Limit?," PSE-Ecole d'économie de Paris (Postprint) hal-00497583, HAL.
    • Handle: RePEc:hal:pseptp:hal-00497583
    DOI: 10.1093/cesifo/ifq002
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    Cited by:

    1. Dittmann, Ingolf & Maug, Ernst & Zhang, Dan, 2011. "Restricting CEO pay," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1200-1220, September.
    2. 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.
    3. John Thanassoulis, 2012. "The Case for Intervening in Bankers’ Pay," Journal of Finance, American Finance Association, vol. 67(3), pages 849-895, June.
    4. 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.
    5. Kentaro Asai, 2016. "Is Capping Executive Bonuses Useful?," IMF Working Papers 2016/196, International Monetary Fund.

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