Session 199

Executive Compensation

Track F

Date: Tuesday, October 13, 2009

 

Time: 10:00 – 11:15

Paper

Room: Meeting Room 3


Session Co-Chairs:
Thomas Brush, Purdue University
Andrew Ward, Lehigh University

Title: Who Shapes Executive Compensation? – A Tale of Two Theories

Authors

  • Simone Maria Eulitz, University of Munich

Abstract: Who shapes executive compensation? The board is widely assumed to determine executive pay. Yet there are hints that top managers have the power to influence the design of their compensation packages in their own interest. Using two conflicting theoretical approaches, namely agency theory and the managerial power approach, we empirically investigate whether the board or top managers are the driving force behind current compensation systems. We are able to show how information from network ties and the use of managerial power have an influence on executive compensation. We find that the information flow descending from the network of a powerful CEO has a significant influence on the respective compensation arrangement, while information brought to a firm by board members does not show any effect.

Title: Distracted Directors: Agency Costs of Home Firm Distractions

Authors

  • Andrew Ward, Lehigh University
  • Christine Shropshire, Arizona State University
  • Scott Graffin, University of Georgia

Abstract: Some governance experts have called for limits to the number of board seats held per person, arguing that directors have insufficient time to commit to multiple directorships and adequately contribute to each board. Yet research has not attended to a complementary agency problem: that executives fail to fulfill their duties on outside boards when events at their home firms demand increasing attention. We suggest that home firm events such as declining performance or CEO succession distract from proper monitoring at outside boards, creating agency costs for the outside firms. We find that home firm events indeed distract outside directors from controlling CEO compensation but do not find a significant result for CEO succession.

Title: The Ratchet Effect of Director Pay: Social Exchange and Status in Director Compensation

Authors

  • Steven Boivie, Texas A&M University
  • Michael Bednar, University of Illinois at Urbana-Champaign
  • Michael Hendron, Brigham Young University

Abstract: In this paper, we develop theory regarding the factors that affect the compensation of directors. In a longitudinal study using director compensation data from 1996 to 2007, we plan to test hypotheses about how information processing demands, directors’ use of social comparison processes, and status effects drive up the compensation level for boards of directors. Specifically, we argue that factors such as social exchange and reciprocity work together to increase director pay. Additionally, we argue that director compensation exhibits a “ratcheting” effect, whereby once it has increased it only continues to increase, and never decreases.

Title: Who Gets the Lion's Share? Top Management Group Pay Disparities and the Role of Powerful CEOs

Authors

  • Patrick McClelland, University of Delaware
  • Jake Messersmith, George Washington University

Abstract: Increasing attention is paid to the distribution of pay in corporations. However, the question of the distribution in pay within top management groups has been little-studied. To complement the growing TMG pay disparities literature, this paper seeks to show that pay disparities within top management groups arise as a function of the distribution of power within them. Based on a sample of 604 publicly-traded firms drawn from the S&P 1500 a theoretical model linking sociopolitical factors in the top management group and top management group pay disparities was tested using hierarchical ordinary least squares (OLS) regression, confirmatory factor analyses, and latent regression. Results indicate that both individual measures of CEO power and broader CEO power constructs predict the distribution of compensation within top management groups.

All Sessions in Track F...

Sun: 10:00 – 11:30
Session 260: Writing Workshop for Doctoral Students and Junior Faculty
Sun: 13:00 – 14:30
Session 261: Shareholder Primacy and Corporate Policy
Sun: 15:00 – 16:30
Session 262: The Role of Government in M&A Activity
Sun: 16:30 – 17:30
Session 310: Corporate Strategy & Governance, IG Meeting
Mon: 12:45 – 14:00
Session 198: Perspectives on CEO Succession
Session 228: Business Groups, Alliances, and Contracts
Mon: 15:45 – 17:00
Session 229: Alliances and Corporate Strategy
Session 230: Ownership Determinants and Consequences
Mon: 17:15 – 18:30
Session 194: CEOs and Top Management Teams
Session 197: Diversity, Identity, and Corporate Governance
Session 233: Top Executives and Directors in Organizational Dynamics
Tue: 10:00 – 11:15
Session 199: Executive Compensation
Session 200: Social Psychological Perspectives of CEOs
Tue: 11:30 – 12:45
Session 195: Competitive Dynamics of Business Groups
Session 234: Constraints and Catalysts on Corporate Growth
Tue: 14:30 – 15:45
Session 226: Relatedness, Dominant Logics, and Other Diversification Logics
Session 231: Institutions and Agents
Wed: 10:00 – 11:15
Session 227: Corporate Strategy & Diversification
Session 232: Stakeholders in the Corporate Governance Equation
Wed: 11:30 – 12:45
Session 196: Behavioral Perspectives on Boards of Directors
Session 225: Acquisitions and Corporate Strategy


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