Home

Compensation Benchmarking, Leapfrogs, and the Surge in Executive Pay

Thomas A. DiPrete; Gregory M. Eirich; Matthew Pittinsky

Title:
Compensation Benchmarking, Leapfrogs, and the Surge in Executive Pay
Author(s):
DiPrete, Thomas A.
Eirich, Gregory M.
Pittinsky, Matthew
Date:
Type:
Articles
Department:
Sociology
Volume:
115
Permanent URL:
Book/Journal Title:
American Journal of Sociology
Abstract:
Scholars frequently argue whether the sharp rise in chief executive officer (CEO) pay in recent years is "efficient" or is a consequence of "rent extraction" because of the failure of corporate governance in individual firms. This article argues that governance failure must be conceptualized at the market rather than the firm level because excessive pay increases for even relatively few CEOs a year spread to other firms through the cognitively and rhetorically constructed compensation networks of "peer groups," which are used in the benchmarking process to negotiate the compensation of CEOs. Counterfactual simulation based on Standard and Poor's ExecuComp data demonstrates that the effects of CEO "leapfrogging" potentially explain a considerable fraction of the overall upward movement of executive compensation since the early 1990s.
Subject(s):
Business
Publisher DOI:
http://dx.doi.org/10.1086/652297
Item views:
718
Metadata:
text | xml

In Partnership with the Center for Digital Research and Scholarship at Columbia University Libraries/Information Services | Terms of Use