The Implications of Firm and Individual Characteristics on CEO Pay

Phillip McKnight and Cyril Tomkins

European Management Journal, 2004, vol. 22, issue 1, 27-40

Abstract: This study examines both the direct and indirect effects of chief executive officer tenure and age on CEO pay in UK organizations. It was found that the positive relationship between shareholder return and increases in the value of executive options held decreases with CEO tenure. Moreover, the positive association between changes in salary and sales was found to increase with CEO tenure. CEO age, on the other hand, weakened the relationship between the level in salary and size of the organization. Several new methodological issues relating to research on executive pay are also raised. One finding was that the study of these relationships might be better pursued through the use of non-linear functions as CEO influence over the pay setting process may not become significant until about the sixth year of tenure. These findings have implications for further research relating to executive pay and to the corporate governance process.

Keywords: CEO; pay; Executive; options; Corporate; governance; CEO; tenure; CEO; age; Agency; theory (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (9)

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