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CEO Pay Slice as a measure of CEO dominance

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  • Zagonov, Maxim
  • Salganik-Shoshan, Galla

Abstract

CEO Pay Slice (CPS), a measure of CEO relative compensation introduced by Bebchuk, Cremers and Peyer [2011. Journal of Financial Economics 102, 199–221], is used widely in the literature as a proxy for chief executive officer dominance. Nonetheless, CPS does not control for the distribution of pay among the top executives and, as we show empirically, often misestimates the level of CEO power. As a result, its empirical application exposes researchers to the risk of drawing false conclusions. We propose a number of supplementary measures that could be used in conjunction with CPS to improve the measurement accuracy of CEO dominance.

Suggested Citation

  • Zagonov, Maxim & Salganik-Shoshan, Galla, 2018. "CEO Pay Slice as a measure of CEO dominance," Research in International Business and Finance, Elsevier, vol. 45(C), pages 571-576.
    • Handle: RePEc:eee:riibaf:v:45:y:2018:i:c:p:571-576
    DOI: 10.1016/j.ribaf.2017.07.092
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    References listed on IDEAS

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    1. Ricardo Correa & Ugur Lel, 2013. "Say on pay laws, executive compensation, CEO pay slice, and firm value around the world," International Finance Discussion Papers 1084, Board of Governors of the Federal Reserve System (U.S.).
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    4. Bebchuk, Lucian A. & Cremers, K.J. Martijn & Peyer, Urs C., 2011. "The CEO pay slice," Journal of Financial Economics, Elsevier, vol. 102(1), pages 199-221, October.
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    9. Chen, Zhihong & Huang, Yuan & Wei, K. C. John, 2013. "Executive Pay Disparity and the Cost of Equity Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(3), pages 849-885, June.
    10. Ing-Haw Cheng & Harrison Hong & José A. Scheinkman, 2015. "Yesterday's Heroes: Compensation and Risk at Financial Firms," Journal of Finance, American Finance Association, vol. 70(2), pages 839-879, April.
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    More about this item

    Keywords

    Corporate governance; Executive compensation; Entrenchment; Pay distribution;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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