Faculty Scholarship 1994 - Present

Inductive Exploration on the Effect of Corporate Reputation and Economic & Non-Economic Factors on CEO Compensation

The growth in executive pay in recent years has increased the attention given to the subject of executive compensation. There is now a heated debate about the compensation and the process followed in determining the compensation packages. Some might argue that the growth in pay levels has gone far beyond what could be explained by the changes in market cap and industry mix. This paper seeks to contribute to the ongoing assessment of the executive pay landscape by examining the relationship of management entrenchment factors such as corporate reputation (corporate social responsibility), corporate financial performance, and the CEO's economic and non-economic human capital across different industry context. Some might argue that the growth in pay levels has gone far beyond what could be explained by the changes in market cap and market mix. Although there are a lot of survey studies done on this particular topic, the results are often mixed. There still exist some controversial issues in the research frame, the outcome of the study demonstrate that corporate reputation, firm size, CEO's tenure and ownership can be used as major significant determinants of CEO compensation regardless of different indices of compensation measures. Contrary to our expectation, however, the firm's performance show mixed and inconclusive results depending on the different measure of performance being used. While our study provides a new research insight on the major determinants of CEO compensation, a further research should be made to explore the CEO compensation and firm performance linkages with respect to different dimensions of performance as well as more advanced research designs including other CEO characteristics and control variables such as gender, quality of education, service year in company, and classification of industry context.