Exploring Executive Bargaining Dynamics: An Empirical Investigation

Sonia Di Giannatale, Itza Tlaloc Quetzalcoatl Curiel-Cabral and Genaro Basulto
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Itza Tlaloc Quetzalcoatl Curiel-Cabral: Division of Economics, CIDE
Genaro Basulto: Tepper School of Business, Carnegie Mellon

No DTE 633, Working Papers from CIDE, División de Economía

Abstract: This article empirically identifies changes in CEOs’ bargaining power using data from ExecuComp and Annual Snapshot databases. It employs a Pareto Weights representation of the agency model to bridge managerial power theory and standard agency theory, proposing an empirical equation to track changes in bargaining power over time. Findings reveal the pivotal role of salary and stock grants in CEO compensation, aligning with both managerial power and agency theories. Analysis also uncovers a significant relationship between CEO age and bargaining power stability. Differences in bargaining power estimates across sectors indicate a multifaceted nature of CEO compensation, influenced by organizational factors and company size. Specifically, in large-cap companies, future compensation instances, like option grants, significantly influence changes in bargaining power, while in mid-cap companies, both present and future compensation factors contribute. Small-cap companies, however, show changes in bargaining power primarily linked to salary, bonus, and stock grants.

Keywords: Dynamic Analysis; Contract Theory; Executive Compensation (search for similar items in EconPapers)
JEL-codes: C61 D86 J33 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-06
New Economics Papers: this item is included in nep-lma
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