2010 Articles
Compensation Benchmarking, Leapfrogs, and the Surge in Executive Pay
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.
Subjects
Files
-
DiPrete_et_al_2010.pdf application/pdf 500 KB Download File
Also Published In
- Title
- American Journal of Sociology
- DOI
- https://doi.org/10.1086/652297
More About This Work
- Academic Units
- Sociology
- Published Here
- October 3, 2011