CEO Pay with Perks
This paper develops an equilibrium matching model for a competitive CEO market in which CEOs’ wage and perks are both endogenously determined by bargaining between firms and CEOs. In stable matching equilibrium, firm size, wage, perks and talent are all positively related. Perks are more sensitive than wage to changes in firm size if there are economies of scale in the cost of providing perks. Productivity-related perks provide common value by increasing both the CEO’s productivity and utility while non productivity-related perks provide private value by increasing the CEO’s utility only. The more perks enhance the CEO’s productivity, the faster perks increase in firm size. We test the predictions of the model using information on CEO wage and perks for S&P 500 companies and find consistent empirical evidence.
|Date of creation:||May 2012|
|Contact details of provider:|| Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4|
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.economics.mcmaster.ca/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nancy L. Rose & Andrea Shepard, 1997.
"Firm Diversification and CEO Compensation: Managerial Ability or Executive Entrenchment?,"
RAND Journal of Economics,
The RAND Corporation, vol. 28(3), pages 489-514, Autumn.
- Nancy L. Rose & Andrea Shepard, 1994. "Firm Diversification and CEO Compensation: Managerial Ability or Executive Entrenchment?," NBER Working Papers 4723, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G. & Wulf, Julie, 2006. "Are perks purely managerial excess?," Journal of Financial Economics, Elsevier, vol. 79(1), pages 1-33, January.
- Xavier Gabaix & Augustin Landier, 2008.
"Why has CEO Pay Increased So Much?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 123(1), pages 49-100.
- Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," 2006 Meeting Papers 518, Society for Economic Dynamics.
- Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," NBER Working Papers 12365, National Bureau of Economic Research, Inc.
- Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, vol. 75(4), pages 1073-1102, July.
- Patrick Legros & Andrew F. Newman, 2002. "Beauty is a Beast, Frog is a Prince: Assortative Matching with Nontransferabilities," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-149, Boston University - Department of Economics, revised Nov 2004.
- Patrick Legros & Andrew F. Newman, 2003. "Beauty is a Beast, Frog is a Prince: Assortative Matching with Nontransferabilities," Economics Working Papers 0030, Institute for Advanced Study, School of Social Science.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- King, Tao-Hsien Dolly & Wen, Min-Ming, 2011. "Shareholder governance, bondholder governance, and managerial risk-taking," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 512-531, March.
- Core, John E. & Guay, Wayne & Larcker, David F., 2008. "The power of the pen and executive compensation," Journal of Financial Economics, Elsevier, vol. 88(1), pages 1-25, April.
- John R. Graham & Si Li & Jiaping Qiu, 2012. "Managerial Attributes and Executive Compensation," Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 144-186.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mcm:deptwp:2012-05. 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: ()
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.