The Economics of Super Managers
We study an agency model with a novel combination of features -agents (CEOs) differ in their ability,firms choose both the scope of the CEOs activities and their incentives,and there is free entry by firms. The outcome is an industry equilibrium in which firms are heterogenous in scope and output. That is,firms hiring more able CEOs complement higher ability with greater scope and stronger incentives,resulting in greater output. Pay has a strong superstars element in the sense that motivating higher ability CEOs to accept a job involving more e?ort and greater risk of managing greater scope,requires much greater rewards. The model is a simple one that makes strong assumptions; this allows us to analyze it very completely and arrive at sharp conclusions. For example,we find that an increase in demand for the industrys product,e.g.,a booming economy or opening of foreign economies,increases both the overall level and skewness of the cross section distribution of CEO compensation. The model suggests a variety of other empirical predictions. Some preliminary empirical work suggests the model may prove quite useful for understanding some interesting trends in compensation. For example,our model provides an explanation for the recent increased level and dispersion in CEO compensation that is rooted in product market competition and rational board reaction to changes in the firms environment.
Nina Baranchuk Glenn MacDonald Jun Yang
School of Management,University of Texas-Dallas,P.O.BOX 830688 SM31,Richardson,TX 75083-0688 School of Business,Washington University in Saint Louis,Campus Box 1133,One Brookings Drive,Saint Lo Kelley School of Business,Indiana University,1309 East Tenth Street,Bloomington,IN 47405-1701
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）