A Tale of Two Theories–Critically Synthesized to Enhance Understanding of Executive Remuneration

Philip Sinnadurai ()
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Philip Sinnadurai: Independent Researcher, Sydney, NSW 2122, Australia

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2023, vol. 26, issue 03, 1-16

Abstract: This concept paper synthesizes two theories of executive remuneration. Soundly motivated, the two manifestations of agency theory of equity examine the market for managerial labor. The first theory models two families of determinants of Chief Executive Officer remuneration: economic factors and wealth expropriation. The second theory models equilibrium corporate governance quality by treating the Chief Executive Officer as a rational maximizer of her own wealth utility. This theory complements the first by facilitating consideration of the contextual role played by Chief Executive Officer greed, in undermining equilibrium pricing of economic factors and the efficacy of corporate governance mechanisms.

Keywords: Efficient executive remuneration; agency costs; corporate governance quality (search for similar items in EconPapers)
JEL-codes: J33 M12 M52 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0219091523300025

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