Do Entrenched Managers Pay Their Workers More?

Jonas Vlachos, Mattias Nilsson, Helena Svaleryd, Henrik Cronqvist and Fredrik Heyman

No 5371, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Analyzing a large panel that matches public firms with worker-level data, we find that managerial entrenchment affects workers? pay. CEOs with more control pay their workers more, but financial incentives through ownership of cash flow rights mitigate such behaviour. These findings do not seem to be driven by productivity differences, and are not affected by a series of robustness tests. Moreover, we find that entrenched CEOs pay more to (i) workers associated with aggressive unions; (ii) workers closer to the CEO in the corporate hierarchy, such as CFOs, division vice-presidents and other top-executives; and (iii) workers geographically closer to the corporate headquarters. This evidence is consistent with entrenched CEOs paying higher wages to enjoy non-pecuniary private benefits such as lower effort wage bargaining and improved social relations with certain workers. More generally, our results show that managerial ownership and corporate governance can play an important role for labour market outcomes.

Keywords: Corporate governance; Agency problems; Private benefits; Matched employer-employee data; Wages (search for similar items in EconPapers)
JEL-codes: G32 G34 J31 J33 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-bec, nep-fin and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Do Entrenched Managers Pay Their Workers More? (2009)
Working Paper: Do Entrenched Managers Pay Their Workers More? (2007)
Working Paper: Do Entrenched Managers Pay Their Workers More? (2006)
Working Paper: Do Entrenched Manager Pay Their Workers More? (2006)
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