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|
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- Nancy L. Rose & Andrea Shepard, 1997.
"Firm Diversification and CEO Compensation: Managerial Ability or Executive Entrenchment?,"
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- 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.
- Raghuram Rajan & Julie Wulf, 2004. "Are Perks Purely Managerial Excess?," NBER Working Papers 10494, National Bureau of Economic Research, Inc.
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- Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," NBER Working Papers 12365, National Bureau of Economic Research, Inc.
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- 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.
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- 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)
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