Session Details: Session 1090

CEO Pay

Track F

Date: Monday, October 13, 2008

 

Time: 15:30 – 16:45

Paper

Room: Salon 22


Session Chair:
Jay Barney, University of Utah

Title: Determinants Of Executives Compensation In Switzerland: “Optimal-Contract” Versus “Fat Cat” Explanation

Authors

  • Katja Rost, University of Zurich
  • Margit Osterloh, Crema Vermoegensverwaltung & Research GmbH

Abstract: Very few business topics are as hotly contested as the salaries of CEOs of public firms. One obvious reason for the interest in CEO-pay is its striking increase. This fact and spectacular governance failures have caused many to conclude that cases of excessive CEO-pay reflect a systematic social problem of “fat-cat” CEOs skimming money at shareholders’ expense. Others are more sanguine, arguing that CEOs are worth every nickel they get, i.e. that CEO-compensation is driven by optimal compensation contracts. This paper develops a theoretical framework to understand whether top executives earn their pay by answering the question what the causes of the high level of executives’ earnings are. Utilizing a panel dataset of Swiss firms for the period 2002–2006, our study contrasts both hypotheses.

Title: Do CEOs Appropriate Firm Profits? Does it Affect Performance?

Authors

  • Alison Mackey, University of Utah
  • P. Konstantina Kiousis, Washington University on St. Louis, Olin Business School
  • Jay Barney, University of Utah

Abstract: The relationship between compensation appropriated from any profits a firm might be generating and that firm’s value is examined for a particular labor market, the market for CEOs. Drawing on detailed biographies of a large sample of executives in the U.S., the effects of CEO human capital on compensation are subtracted from a CEO’s total compensation, leaving only that part of a CEO’s compensation that is appropriated from any profits a firm has generated. The relationship between this profit-appropriating compensation and firm value is then examined, along with an analysis of when this profit-appropriating compensation increases or decreases a firm’s value. The analysis conducted in this paper suggests that for a large majority of firms, enabling CEOs to appropriate some of the economic profits a firm is generating increases in the value of the firm.

Title: Interest Alignment and CEO Compensation in Family Controlled Firms

Authors

  • Manisha Singal, Virginia Tech
  • Vijay Singal, Virginia Tech

Abstract: Recent research has suggested that interest alignment, i.e. the degree to which members of an organization are motivated to behave in line with organizational goals, is a source of competitive advantage that can generate rents for the firm (Gottschlag and Zollo, 2007). Drawing on agency theory, we propose to test the interest alignment premise in the context of CEO compensation contracts in family and non-family controlled firms in the S&P 500 index. Based on a longitudinal research design, we hypothesize that family firm-bred, and professional CEOs in family firms will have lower compensation and a different pay-mix than CEOs in comparable non-family firms. Our study contributes to the extant literature on governance and ownership, entrepreneurship, and compensation.

Title: The Effects of Short-Term and Long-Term Oriented Managerial Behavior on Medium- Term Financial Performance: A Longitudinal Analysis

Authors

  • Matthias Brauer, University of Mannheim
  • Florian Waizenegger, Goldman Sachs

Abstract: Short-term oriented managerial behavior aimed at maximizing quarterly or annual results at the expense of firms’ long-term performance has become severely criticized. In the face of continuously decreasing CEO tenure, CEOs, however, seem to have few incentives to embrace long-term oriented behavior. Instead, the question of foremost importance to CEOs today is whether short-term oriented behavior already harms financial performance in the three to four years of their own tenure, and whether CEOs stand a chance of benefiting from long-term oriented behavior while still in office. Consequently, our longitudinal study focuses on the medium-term performance implications of short-term and long-term oriented managerial behavior in Europe’s largest publicly listed companies. Counter to conventional wisdom, results show that long-term oriented behavior is compatible with CEO self-interest.

All Sessions in Track F...

Mon: 11:15 – 12:30
Session 1089: Make, Ally or Buy
Session 1096: Executive Compensation
Mon: 15:30 – 16:45
Session 1086: Alternative Views of Value Creation
Session 1090: CEO Pay
Session 1107: Executive and External Forces in Strategy
Mon: 17:00 – 18:15
Session 1091: Impression Management
Session 1098: Social Networks
Tue: 11:15 – 12:30
Session 1093: Succesion and Team Dynamics
Session 1103: Social and Human Capital
Tue: 14:30 – 15:45
Session 1095: Diversification
Session 1105: Governance Perspectives
Wed: 10:00 – 11:15
Session 1104: Managing Alliance Relationships
Session 1106: New Corporate Strategy Perspectives
Wed: 11:30 – 12:45
Session 1088: Acquisitive Growth Strategies
Session 1092: Dynamic Strategies and Resources


Strategic Management Society

Cologne Conference