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A Tale of Two Theories–Critically Synthesized to Enhance Understanding of Executive Remuneration

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  • Philip Sinnadurai

    (Independent Researcher, Sydney, NSW 2122, Australia)

Abstract

This concept paper synthesizes two theories of executive remuneration. Soundly motivated, the two manifestations of agency theory of equity examine the market for managerial labor. The first theory models two families of determinants of Chief Executive Officer remuneration: economic factors and wealth expropriation. The second theory models equilibrium corporate governance quality by treating the Chief Executive Officer as a rational maximizer of her own wealth utility. This theory complements the first by facilitating consideration of the contextual role played by Chief Executive Officer greed, in undermining equilibrium pricing of economic factors and the efficacy of corporate governance mechanisms.

Suggested Citation

  • Philip Sinnadurai, 2023. "A Tale of Two Theories–Critically Synthesized to Enhance Understanding of Executive Remuneration," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 26(03), pages 1-16, September.
    • Handle: RePEc:wsi:rpbfmp:v:26:y:2023:i:03:n:s0219091523300025
    DOI: 10.1142/S0219091523300025
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    More about this item

    Keywords

    Efficient executive remuneration; agency costs; corporate governance quality;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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