Power and Privilege in the Large Corporation: Corporate Control and Managerial Compensation

The research presented here investigates the relative utility of a power theory versus a functional theory of organizational stratification as they pertain to managerial compensation in the large corporation. Concretely, it examines the effects of different types and levels of corporate control, adjusted for the effects of corporate size and performance, on three dimensions of compensation among 218 industrial corporations during 1975 and 1976. In order to assess the power of the chief executive officer in relation to other directors, the analysis employs a hierarchy of control configurations based on the distribution of stock ownerwhip among the members of the board of directors. In general, the results confirm the hypothesis that the remuneration received by a chief executive officer is directly related to his power within the corporation. A major exception to this pattern involves chief executive officers who are also principal stockholders in their corporations and receive dividend income from their stock.