Executive compensation and compensation risk: evidence from technology firms

Paul Dunn, Zhongzhi He, Samir Trabelsi and Zhimin (Jimmy) Yu

Managerial Auditing Journal, 2018, vol. 34, issue 3, 289-304

Abstract: Purpose - The purpose of this research is to investigate factors that contribute to technology firms paying higher compensation than non-technology firms, and why the mix of compensation at technology firms is different than the compensation packages at non-technology firms. Design/methodology/approach - This research used a sample of 1,009 firm-year observations for the five-year period from 2001 to 2005 and random-effects regression models. Findings - It was found that the total compensation paid to the CEOs of technology firms is higher than the total compensation paid to the CEOs of non-technology firms, and that the value of the stock options granted to the former is greater than the value of the stock options granted to the latter. Research limitations/implications - The results are largely consistent with the labour market efficiency perspective. The higher compensation paid to CEOs in technology firms seems to be commensurate with the higher compensation risk that CEOs in technology firms bear. Practical implications - Compensation designers should consider both the benefits and costs of granting stock and stock options to executives. An increased portion of stock options definitely aligns the interests of shareholders and CEOs together, and could maximize the retentive effect if CEOs have a significant amount of their wealth in unvested in-the-money options. Social implications - Consistent with the literature, a CEO could earn much higher pay if he or she also serves as the chair of the board of directors. Practically, firms do not require all governance mechanisms. They just require one set of suitable governance mechanisms. Originality/value - This paper is the first to investigate factors that contribute to technology firms paying higher compensation than non-technology firms, and that do explain why the mix of compensation at technology firms is different than the compensation packages at non-technology firms.

Keywords: Executive compensation; Compensation risk; Technology firms; J33; J44; M12; M52 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-10-2017-1687

DOI: 10.1108/MAJ-10-2017-1687

Access Statistics for this article

Managerial Auditing Journal is currently edited by Professor Jie Zhou

More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().