Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation

Item Type Journal paper
Abstract

Although studies about the determinants of CEO compensation are ubiquitous, the balance of evidence for one of the more controversial theoretical approaches, managerial power theory, remains inconclusive. We provide a meta-analysis of 219 U.S.-based studies, focusing on the relationships between indicators of managerial power, and levels of CEO compensation and CEO pay-performance sensitivities. Our results indicate that managerial power theory is well-equipped for predicting core compensation variables like total cash and total compensation, but less so for predicting the sensitivity of pay to performance. In most situations where CEOs are expected to have power over the pay setting process, they receive significantly higher levels of total cash and total compensation. In contrast, where boards are expected to have more power, CEOs receive lower total cash and total compensation. In addition, powerful directors also appear to be able to establish tighter links between CEO compensation and firm performance, and can accomplish this even in the face of powerful CEOs. We discuss implications for theory and research regarding the determinants of executive compensation.

Authors van Essen, Marc; Otten, Jordan & Carberry, Edward J.
Journal or Publication Title Journal of Management
Language German
Keywords executive compensation, managerial power theory, agency theory, corporate governance, meta-analysis
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 1 January 2015
Publisher Sage Publ.
Place of Publication Thousand Oaks, Calif.
Volume 41
Number 1
Page Range 164-202
Number of Pages 39
ISSN 0149-2063
ISSN-Digital 1557-1211
Publisher DOI 10.1177/0149206311429378
Depositing User Prof. Dr. Marc van Essen
Date Deposited 14 Oct 2015 11:23
Last Modified 23 Aug 2016 11:22
URI: https://www.alexandria.unisg.ch/publications/244555

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Citation

van Essen, Marc; Otten, Jordan & Carberry, Edward J. (2015) Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation. Journal of Management, 41 (1). 164-202. ISSN 0149-2063

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https://www.alexandria.unisg.ch/id/eprint/244555
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