TITLE

CEO POWER AND INCENTIVE PAY UNDER COMPETITION

AUTHOR(S)
Boumosleh, Anwar; Cline, Brandon N.; Saleh, Rola
PUB. DATE
July 2009
SOURCE
Journal of the Academy of Business & Economics;2009, Vol. 9 Issue 3, p143
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We examine the struggle of power between the CEO and board in their endeavor to determine optimal CEO compensation structure under market competition. CEOs negotiate for safer contracts when their personal reward is at risk. However, shareholders and the board require performance based compensation in order to motivate the CEO and secure survivorship. The findings in this paper indicate that firms contract their CEO with greater incentive pay the higher the competition within the industry. The results are consistent with the argument that boards have the upper hand in negotiating CEO pay proposed by Rose and Sheppard (1997). However, we do find that larger ownership and longer tenure enable CEOs to make their pay less sensitive to market conditions.
ACCESSION #
45462874

 

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