What matters in executive compensation? The Role of Internal Governance, Corporate Culture, and the Labor Market
Speaker
Abstract
| Using a unique data set, we examine the relative importance of firm internal decision-making, corporate governance, corporate culture, and the labor market in explaining executive compensation. Our results suggest that the labor market and firm internal governance are the most important determinants. In particular, executives are compensated more and have a larger share of variable compensation if the firm’s international activities make them highly exposed to the U.S. market, the highest paying and most liquid labor market for professional managers. In addition, pay is higher when boards are more inclined to favor shareholders at the expense of other stakeholders. We also find that executives receive a higher fraction of variable compensation in firms with dispersed ownership, especially if they take final decisions on strategic issues. We find no evidence that managerial entrenchment, as captured by social ties between executive and non-executive directors, can explain compensation. Finally, corporate culture appears to play only a minor role. Perhaps a bit surprisingly, in firms in which board members value achievement, executives receive lower pay. |
| Mariassunta Giannetti is a professor of Finance at the Stockholm School of Economics, a CEPR research fellow in the financial economics program, a research associate of the European Corporate Governance Institute, and an Extramural Fellow of CentER, Tilburg University. She received a Ph.D. in Economics from the University of California, Los Angeles in 1999 and completed her undergraduate studies (BA and M.Sc.) with the highest honors at Bocconi University (Italy) in 1995. Her research interests lay at the intersection between corporate finance, international finance and development economics. Mariassunta is recipient of several grants and awards. She was awarded the Corporate Partners’ Research Award by the Stockholm School of Economics and was nominated Lamfalussy Research Fellow by the European Central Bank. Her work is regularly presented at leading finance conferences (including American Finance Association, American Economic Association, Western Finance Association, European Finance Association and CEPR and NBER meetings) and academic departments. Her publications have appeared in leading journals including Journal of Finance, Review of Financial Studies, Journal of Financial and Quantitative Analysis, and Economic Journal. Professor Giannetti teaches a MSc course in International Finance and a Ph.D. course in Empirical Corporate Finance. She has also worked as an economist in the research department of the Bank of Italy and served as a consultant for the European Commission on issues related to financial integration, corporate financing, and growth. |
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| http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1534566 |
| Contact information: |
| Viorel Roscovan |
