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CEO Compensation for Major US Companies in 2006

Author

Listed:
  • Samia El Baroudy

    (Stanford University)

  • Ruth Levine

    (Stanford University)

  • Ling Shao

    (Stanford University)

Abstract

The purpose of this paper is to update the empirical investigation into pay-setting practices of major U.S. companies. While it enters the debate on the determinants of CEO compensation, our approach is explanatory rather than prescriptive. Our empirical analysis is based on a sample of 236 major U.S. firms from the 2006 WSJ/Mercer CEO Compensation Survey. We run a series of cross-sectional regressions that consider the effects of performance indicators on total direct compensation and the cash bonus. We also test the effects on non-performance variables, which represent potential agency problems involved with CEO compensation. We find that CEO compensation is tied to firm performance, but whether the link has increased or decreased in strength over time remains unclear. We also determine that non-performance related factors contribute significantly to CEO compensation: CEOs who are also chairmen of the board make 35% more than non-chairmen, and companies that grant more stock options tend to have 30% lower dividend yields.

Suggested Citation

  • Samia El Baroudy & Ruth Levine & Ling Shao, 2008. "CEO Compensation for Major US Companies in 2006," Discussion Papers 07-028, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:07-028
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    File URL: http://www-siepr.stanford.edu/repec/sip/07-028.pdf
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    More about this item

    Keywords

    executive compensation; severance packages; CEO pay; CEO performance;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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