The effects of ownership structure on conditions at the top: The case of CEO pay raises



We examine how ownership configuration affects the determination of CEO pay raises. Based on a sample of 188 firms over a 5-year period, it was found that pay raises were based on distinctly different factors, depending on the ownership profile of the firm. In management-controlled firms—where no single major owner exists—results suggest an overarching pay philosophy: maximize CEO pay, subject to demonstration of face legitimacy of that pay. In externally-controlled firms—where a major (nonmanager) owner exists—results suggest a very different philosophy: minimize CEO pay, subject to the ability to attract/retain a satisfactory CEO.