Political Affiliation and Pay Slice: Do Blue CEOs Accept Less Green?

Richard Borghesi and Kiyoung Chang

International Review of Finance, 2018, vol. 18, issue 3, 453-461

Abstract: We examine the relationship among CEO political alignment, compensation, and pay disparity (relative to other high‐earning executives) and find that Democratic CEOs accept less pay and a significantly lower pay slice. That is, left‐leaning CEOs put their money where their mouth is regarding the Democratic ideology of economic and social equity. This smaller pay gap is not a function of variations in managerial ability; if anything, Democratic CEOs are more talented than Republican CEOs. Results suggest that Democratic CEOs may be more effective at running firms in which collaboration among top executives is more valuable than are the potential gains from tournament incentives.

Date: 2018
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International Review of Finance is currently edited by Bruce D. Grundy, Naifu Chen, Ming Huang, Takao Kobayashi and Sheridan Titman

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