재무연구 제 권 호 (2018년 5월)
Asian Review of Financial Research, Vol., No..
pp.1078~1116
pp.1078~1116
CEO Compensation and Employee Wages
Rachel Graefe-Anderson Assistant Professor, University of Mary Washington
Unyong Pyo Associate Professor of Finance, Department of Finance, Operations, and Information Systems, Goodman School of Business, Brock University, St. Catharines, ON, Canada
Baoqi Zhu Static Data Analyst at the BMO Financial Group
This study examines the impact of CEO equity-based compensation (EBC) on employee wages. Using pay-performance sensitivities (PPS) as a proxy for EBC and labor expenses as a proxy for employee wages, we conduct multivariate analysis (OLS models) and find that CEOs with higher EBC tend to pay their employees lower wages. We also examine the impact of EBC on average employee wages in different industries and find that such an impact is more evident in non-technology firms than in technology firms. Finally, we find that CEOs with higher PPS are more likely to depress employee wages when the business cycle shows a downturn. While the literature on CEO compensation suggests that EBC can mitigate agency conflicts between managers and shareholders, we suggest that high levels of EBC can create another aspect of the agency conflicts, contributing to income inequality even within corporations.
Rachel Graefe-Anderson
Unyong Pyo
Baoqi Zhu
This study examines the impact of CEO equity-based compensation (EBC) on employee wages. Using pay-performance sensitivities (PPS) as a proxy for EBC and labor expenses as a proxy for employee wages, we conduct multivariate analysis (OLS models) and find that CEOs with higher EBC tend to pay their employees lower wages. We also examine the impact of EBC on average employee wages in different industries and find that such an impact is more evident in non-technology firms than in technology firms. Finally, we find that CEOs with higher PPS are more likely to depress employee wages when the business cycle shows a downturn. While the literature on CEO compensation suggests that EBC can mitigate agency conflicts between managers and shareholders, we suggest that high levels of EBC can create another aspect of the agency conflicts, contributing to income inequality even within corporations.
