Determinants of Executive Compensation

Determinants of Executive Compensation OAssoeiate Professor, Faculty of Business, McMaster University. !The theory can be traced to Berle and Means (1933). For its later formulations, see Baumol (1959); Monsen and Downs (1965); Williamson (1964). *McGuire, Chiu, and Elhing (1962); Lewellen and Huntsman (1970); Roberts (1956; 1959); and Wallace (1973). ’Lewellen and IIuntsman (1970) did not find a significant relationship between company size and cxccutive compensation. However, [lie form in which company size was entered in the regression analysis irivalidatcs their finding to a large extent. The authors initially measured company size in terms of sales revenue. But, in order to avoid intercollinearity with other independent variables, they subsequently divided it by assets. Thus, company size was entered in the regression analysis as sales revenue per unit of assets, which is more a measure of company performance than size. I N n t v n i A i . RELUIoNS, Vol. 20, No. 1 (Winter 1981). 1981 by the Regents of the University of California. OOlY/8676/81/215/36/$1.~0 Executive Compensation / 37 himself acknowledges that the market forces which underlie his explanation “might not be strong enough to account for as close a relationship as the data suggests” (p. 103). Simon (1957) has proposed a http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Industrial Relations Wiley

Determinants of Executive Compensation

Industrial Relations, Volume 20 (1) – Jan 1, 1981

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Publisher
Wiley
Copyright
Copyright © 1981 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0019-8676
eISSN
1468-232X
DOI
10.1111/j.1468-232X.1981.tb00180.x
Publisher site
See Article on Publisher Site

Abstract

OAssoeiate Professor, Faculty of Business, McMaster University. !The theory can be traced to Berle and Means (1933). For its later formulations, see Baumol (1959); Monsen and Downs (1965); Williamson (1964). *McGuire, Chiu, and Elhing (1962); Lewellen and Huntsman (1970); Roberts (1956; 1959); and Wallace (1973). ’Lewellen and IIuntsman (1970) did not find a significant relationship between company size and cxccutive compensation. However, [lie form in which company size was entered in the regression analysis irivalidatcs their finding to a large extent. The authors initially measured company size in terms of sales revenue. But, in order to avoid intercollinearity with other independent variables, they subsequently divided it by assets. Thus, company size was entered in the regression analysis as sales revenue per unit of assets, which is more a measure of company performance than size. I N n t v n i A i . RELUIoNS, Vol. 20, No. 1 (Winter 1981). 1981 by the Regents of the University of California. OOlY/8676/81/215/36/$1.~0 Executive Compensation / 37 himself acknowledges that the market forces which underlie his explanation “might not be strong enough to account for as close a relationship as the data suggests” (p. 103). Simon (1957) has proposed a

Journal

Industrial RelationsWiley

Published: Jan 1, 1981

References

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