Managerial Power and Compensation

Bruno Frey and Marcel Kucher

No 28, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation.

Keywords: Power; Managerial Compensation; Compensating Wage Differentials (search for similar items in EconPapers)
JEL-codes: A12 J31 M12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind and nep-lab
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Citations: View citations in EconPapers (6)

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