CEO Compensation in Korea: Is It Different than in the US? A Comparison between Korean Non-Life Insurance Firms and US Property-Liability Insurance Firms

Sangyong Han and Hyejeong Mun
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Sangyong Han: Korea Insurance Research Institute (KIRI), 38 Gukjegeumyung-ro 6-gil, Youngdeungpo-gu, Seoul 07328, Korea
Hyejeong Mun: Korea Insurance Research Institute (KIRI), 38 Gukjegeumyung-ro 6-gil, Youngdeungpo-gu, Seoul 07328, Korea

IJFS, 2021, vol. 9, issue 4, 1-20

Abstract: This study investigates the level, structure, and pay-for-performance relationship of CEO compensation in Korean non-life insurance companies. We find that seniority plays an important role in setting CEO compensation practices and that performance-based pay, such as bonus, is more effective than base salary in enhancing shareholder value for Korean non-life insurers. Unlike previous studies that show that international differences in executive pay have been diminished considerably since the 2000s, our evidence shows that there is a remarkable difference in CEO compensation between Korean non-life insurers and U.S. property-liability insurers. Furthermore, we provide evidence that the pay-performance relationship is weaker in Korean non-life insurance companies relative to US counterparts, suggesting that it is necessary for Korean non-life insurers to tie performance-based compensation more closely to shareholder value in the design of CEO compensation.

Keywords: CEO compensation; pay-performance sensitivity; property-liability insurers (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
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