CEO Incentives and Firm Size
Year: 2004
Type: article
Abstract: We develop a model that clarifies how to measure CEO incentive strength and how to reconcile the enormous differences in pay sensitivities between executives in large and small firms. The crucial parameter is shown to be the elasticity of CEO productivity with respect to firm size. We find that CEO marginal products rise significantly with firm size (confirming Rosen’s conjecture that CEOs of large firms have a “chain letter” effect on firm performance), and overall CEO incentives are roughly constant, or decline slightly, with firm size. We employ a multitask model to discuss implications for the design of control systems.
Source: Journal of Labor Economics
DOI: 10.1086/423154
Authors: George P. Baker, Brian J. Hall
Institutions: National Bureau of Economic Research, Harvard University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123920159