CEO's Pay Slice, Governance, and Performance: A Study

Abstract

The present study analyses the share of the top executive compensation captured by the CEO for a sample of 2,153 firm-years of Australian firms for the period 2005 to 2011. Empirical findings from both the OLS and FE analyses show that median industry CEO pay slice, board independence, CEO tenure and insider shareholding have a significant positive influence on the CEO pay slice, while board size, CEO turnover and CEO shareholding have a significant negative influence after controlling for economic determinants of CEO pay such as size of firm, growth opportunities and performance. CEO pay slice has no significant influence on the firm value as measured by Tobin's Q. Analyses also show that CEO pay slice has a significant positive impact on RoA and stock returns. These results for the Australian firms are in variance with that of Bebchuk et al. (2011) for the American firms