Global environment and factors affecting the salary of the CEO (chief executive officer) of a goods producing firm: an Econometric modeling approach using STATA

Zohaib Aziz, Ahsanuddin Muhammad and Ghulam Hussain

MPRA Paper from University Library of Munich, Germany

Abstract: The flattening of the world thanks to the cluster of profound socio-economic and politico-cultural changes has created unprecedented challenges for organizational leadership and management. The fast evolving global world of ours where challenges have to be continually met requires timely decision taken by CEOs’ (Chief Executive Officers) who shape and give direction to world politics and economic order. In the light of this we have studied the decisions taken by CEOs’ of goods producing firms’ and their decisions on firm’s productivity and profitability which in turn depend to a great deal on CEOs’ salary structure. Better salary leads to influx of people from all over the world often leading to brain drain situation in developing countries. Globalization has created social disparities in the present economic system that are molded by the increasing polarization of work between people working in high paid knowledge sectors and others working in low paid sectors. Prior research has suggested that in a global environment capitalists benefit from other capitalists who pay higher salaries from the expansion of income. The salary data of 177 CEOs’ (Chief Executive Officers) for the year 1990 – published in the Business Week of June 6, 1991 has been analyzed to determine and correlate the effects of sales, market value (mktval), profit and CEOs’ tenure (ceoten) on the CEOs’ salary. The performance of goods producing firms where the CEOs’ served has been found to be strongly correlated with their salary intakes. The basic purpose of this research and study is to analyze the deciding factor in the salaries of top executives. The CEOs’ are the policy makers in all government and non-governmental organizations and their decision-taking greatly influences the performances of their institution. CEOs’ performance with respect to their salaries and other variables mentioned above is found to be the deciding factor as regards policy execution matters in goods producing firm’s performances.

Keywords: Econometric model; multicollinearity; STATA10; elasticity; employment tenure and market value (search for similar items in EconPapers)
JEL-codes: C1 C2 C8 J2 L1 (search for similar items in EconPapers)
Date: 2010-09-11
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