Factors Influencing CEO Compensation in US Telecommunication Industry
Keywords:Agency problem, CEO compensation, Corporate governance, US telecommunication companies.
AbstractThe objective of this paper is to define the relationship between a set of factors and CEO compensation that will enable companies to imply better corporate governance practices in their management process. Developed econometric model is tested on the data of US telecom companies for the period 2004-2012. The study revealed that CEO compensation is strongly and positively related to revenue and earnings per share of the company, and unrelated to return on net assets and market value added. These results enable companies to use CEO compensation system as an effective mechanism to eliminate agency problem and, consequently, agency costs. The main directions for further research in this field are outlined.
Adjaodi F., Zeghal D., Andaleeb S., 2007. The effect of board quality on performance: a study of Canadian firms. Corporate Governance, 2: 145-183.
Agarwal N. 1981., Determinants of executive compensation. Industrial Relations, 1: 36-45.
Baum C.L., Sarver L., Strickland T., 2004. EVA, MVA and CEO Compensation: further evidence. American Business Review, 22(2): 82-87.
Bayburina E., Shustrova Y., 2008. Influence of executive compensation on valuation of Russian corporations. Corporate Finance, 4(8): 60-79.
Bebchuk L. A., Fried J.M., 2004. Pay Without Performance: The Unfulfilled Promise of Executive Compensation. Harvard University Press. UC Berkeley Public Law Research Paper No. 537783.
Bebchuk L., Grinstein Y., 2005. The growth of executive pay. Oxford Review of Economic Policy, 2: 283-303.
Beer M., Katz, N., 1998. Do incentives work? The perceptions of senior executives from thirty countries. Harvard Business School Working Paper.
Belkaoui A., Pavlik E., 1993. Effects of ownership structure, firm performance, size and diversification strategy on CEO compensation: A path analysis. Managerial Finance, 19(2): 33-54.
Black B., Jang H., Kim W., 2005. Does corporate governance predict firms’ market values? Evidence from Korea. Journal of Law, Economics and Organization, 2: 660-691.
Deckop J. R., 1988. Determinants of chief executive officer compensation. Industrial and Labor Relations Review, 2: 215-226.
Fatemi A., Desai A., Katz J., 2002. Wealth creation and managerial pay: MVA and EVA as determinants of executive compensation. Global Finance Journal, 14: 159-179.
Ferris S.P., Murali J., Pritchard A. C., 2003. Too busy to mind the business? Monitoring by directors with multiple board appointments. The Journal of Finance, 58: 1087-1112.
Florin B., Hallock K.F., Webber L.D., 2010. Executive pay and firm performance: methodological considerations and future directions. Research in personnel and human resources management, 29: 49-86.
Garen J.E., 1994. Executive compensation and principal-agent theory. The Journal of Political Economy, 102(6): 1175-1199.
Hall B.J, Liebman J.B., 1998. Are CEOs really paid like bureaucrats? The Quarterly Journal of Economics, MIT Press, 113(3): 653-691.
Hambrick D.C., Finkelstein S., 1995. The effects of ownership structure on conditions at the top: the case of CEO pay raises. Strategic Management Journal, 16(3): 175-193.
Hermalin B., Weisbach M., 1988. The determinants of board composition. Journal of Economics, 4: 589-606.
Junarsin E., 2011. Executive compensation and firm performance: an empirical examination. European Journal of Economics, Finance and Administrative Sciences, 28: 163-179.
Kroll M., Simmons S. A., Wright P., 1990. Determinants of chief executive officer compensation following major acquisitions. Journal of Business Research, 20: 349-366.
Lawrence J., Stapledon, G., 1997. Do independent directors add value? Research report. Centre for corporate law and securities, the University of Melbourne. Available at: http://mjil.law.unimelb.edu.au/files/dmfile/IndependentDirectorsReport2.pdf
Leonard J. S., 1990. Executive pay and firm performance. Industrial and Labor Relations Review, 43(3): 13-29.
McGuire J., Dow S., Argheyd K., 2003. CEO incentives and corporate social performance. Journal of Business Ethics, 45(4): 341-359.
Mehran H., 1995. Executive compensation structure, ownership and firm performance. Financial Economics, 2: 163-184.
Murphy K. J., 1985. Corporate performance and managerial remuneration: an empirical analysis. Journal of Accounting and Economics, 7: 11-42.
Murphy K. J., 1999. Executive Compensation, Handbook of Labor Economics, Orley Ashenfelter and David Card, eds. Amsterdam: North Holland.
Roberts P.W., Dowling, G., 2002. Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23(12): 1077-1093.
Rosenstein S., Wyatt J. G., 1990. Outside directors, board independence, and shareholder wealth. Journal of Financial Economics, 26(2): 175-191.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after official publication, as it can lead to productive exchanges as well as greater citation of published work (See The Effect of Open Access).