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CEO compensation: A resource advantage and stakeholder‐bargaining perspective
Author(s) -
Pandher Gurupdesh,
Currie Russell
Publication year - 2013
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.1995
Subject(s) - microeconomics , industrial organization , bargaining power , business , economic rent , competitive advantage , overconfidence effect , shareholder , value (mathematics) , stakeholder , economics , resource (disambiguation) , shareholder value , strategic management , corporate governance , marketing , finance , management , psychology , computer network , computer science , social psychology , machine learning
This paper studies how CEO pay and its composition is shaped by strategic factors related to the firm's capacity to generate rents and value, the uncertainty of its resource advantage, and the competitive interaction between firm stakeholders and top management. This is done using an analytical framework in which the CEO and other firm stakeholders interact over the firm's resource surplus as utility‐maximizing claimants based on their relative bargaining power while providing shareholders their market‐based required return. Results from the model yield a number of cogent strategic insights and predictions on the causal interplay between CEO pay, firm growth and risk characteristics, stakeholder management, corporate strategy (e.g., offshoring production), and behavioral biases such as CEO optimism and overconfidence. Copyright © 2012 John Wiley & Sons, Ltd.