The Rise in Executive Compensation - Consequence of a 'War for Talents'?

Katja Rost

CREMA Working Paper Series from Center for Research in Economics, Management and the Arts (CREMA)

Abstract: The rise in executive compensation has triggered a great amount of public controversy and academic research. Critics have referred to the salaries paid to managers as 'pay without performance', while defenders have countered that the large salaries can be explained by a 'war for talents'. This research tests whether a war for talent provides an explanation. The rise in executive compensation in recent years is explained by the assumption that, over the past decades, general managerial skills have become more important relative to firm-specific knowledge for the production of managers. A shift toward transferable managerial skills requires higher compensation, particularly in large firms, to attract and retain managerial talents. Relying on an internationalized and deregulated managerial labor market, i.e. the Swiss banking sector, the empirical findings confirm that a shift toward transferable managerial skills in large firms is indeed an explanation for the rise in executive compensation. However, the shift towards transferable managerial skills in large firms does not improve firm performance, giving no supporting evidence for a war for talent. It is discussed how transferable managerial skills may used to legitimize higher compensation at the top, e.g. by promulgating definitions of talent in elite labour markets.

Keywords: Executive compensation; efficient labor market view; transferable skills; outside options (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-bec and nep-lab
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.crema-research.ch/papers/2010-14.pdf Full Text (application/pdf)
https://www.crema-research.ch/abstracts/2010-14.htm Abstract (text/html)

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:cra:wpaper:2010-14

Access Statistics for this paper

More papers in CREMA Working Paper Series from Center for Research in Economics, Management and the Arts (CREMA) Contact information at EDIRC.
Bibliographic data for series maintained by Anna-Lea Werlen ( this e-mail address is bad, please contact ).