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Dissertation
A longitudinal study of executive compensation: evidence and explanations
Doctor of Philosophy (Ph.D.), Drexel University
Jul 1999
DOI:
https://doi.org/10.17918/00009087
Abstract
This dissertation examines how executive compensation practice and theory has changed over the past 50 years. The data is primarily the Dow 30 industrial companies augmented and extended by a 900 firm five year contemporary data set. In a series of three essays, compensation levels, pay/performance sensitivity and determinants of CEO compensation is examined. Essay One finds that compensation levels have changed significantly both in total and by component during the study period. On a real, after-tax basis, compensation remained relatively stable from 1947 until the early 1980s, when a sharp upward trend began. The composition of compensation packages has significantly changed over the study period from salary domination to option domination. Compensation is consistently driven by firm performance when measured by market returns. Additionally, tax theories have significant explanatory value. CEOs have benefited extraordinarily from the series of tax rate cuts during the study period. Each significant cut created a permanent upward change in compensation. Contrary to prior literature, pay/performance sensitivity is generally consistent over the study period and shows signs of increasing in the most recent periods. A market driven definition of firm performance is most closely tied to compensation, but the neoclassical (accounting driven) and managerial (revenue growth driven) theories have historic periods of dominance. Compensation is most strongly determined by CEO tenure and CEO ownership and tax considerations. Macroeconomic factors have little predictive ability. The determinants have evolved over time and continue to show trend changes. I find significant inter-industry and firm size differences in the predictive model. Tax theory has significant explanatory power, although agency-alignment explanations of compensation are more consistently significant.
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Details
- Title
- A longitudinal study of executive compensation
- Creators
- Alexander H. Wilson
- Contributors
- Thomas Chi-Nan Chiang (Advisor) - Drexel University, Drexel University (1970-)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Number of pages
- x, 387 pages
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business; Drexel University
- Other Identifier
- 991021889066704721