CEO compensation

Carola Frydman*, Dirk Jenter

*Corresponding author for this work

Research output: Contribution to journalArticle

156 Citations (Scopus)

Abstract

This paper surveys the recent literature on CEO compensation. The rapid rise in CEO pay over the past 30 years has sparked an intense debate about the nature of the pay-setting process. Many view the high level of CEO compensation as the result of powerful managers setting their own pay. Others interpret high pay as the result of optimal contracting in a competitive market for managerial talent. We describe and discuss the empirical evidence on the evolution of CEO pay and on the relationship between pay and firm performance since the 1930s. Our review suggests that both managerial power and competitive market forces are important determinants of CEO pay, but that neither approach is fully consistent with the available evidence. We briefly discuss promising directions for future research.

Original languageEnglish (US)
Pages (from-to)75-102
Number of pages28
JournalAnnual Review of Financial Economics
Volume2
DOIs
StatePublished - Dec 1 2010

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CEO compensation
CEO pay
Competitive market
Firm performance
Managers
Contracting
Market forces
Empirical evidence
Managerial power
Power market

Keywords

  • Corporate governance
  • Equity compensation
  • Executive compensation
  • Incentive compensation
  • Managerial incentives
  • Option compensation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Frydman, Carola ; Jenter, Dirk. / CEO compensation. In: Annual Review of Financial Economics. 2010 ; Vol. 2. pp. 75-102.
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CEO compensation. / Frydman, Carola; Jenter, Dirk.

In: Annual Review of Financial Economics, Vol. 2, 01.12.2010, p. 75-102.

Research output: Contribution to journalArticle

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