Remuneration

Abstract

The real wage of the average worker in the United States has fallen 13 percent in the last 20 years, while the average chief executive officer (CEO) has received a pay raise of over 300 percent (Crystal, 1991). This glaring contrast has sparked an explosion in academic research on executive compensation. The argument that Crystal (1991) proposed, ¡°just about all of the rational factors you can think of, taken together, don¡¯t play a big role in determining executive pay¡±, is dominant in this medium. Despite this fact, research on executive paychecks has continued to grow as the literature is truly interdisciplinary across the fields of economics, finance and accounting, industrial relations, organizational behavior and strategy (Murphy 1999).

Labour economists have drawn upon many conclusions on executive remuneration from a large theoretical and empirical interdisciplinary literature. They argued that executive remuneration offers opportunities to analyze many c...