Although research on CEO compensation is voluminous, only limited attention has been paid to the role of industry. In this paper we develop an industry-level explanatory theory based on the concept of managerial discretion, and test it using a multi-level structural equation modeling approach at the industry level. In contrast to previous work, this theory offers an explanation of why, and how, industry is related to CEO compensation. In a sample of 933 firms in 109 3-digit SIC industries, we find that the level of industry discretion is significantly related to both the level of CEO compensation, and the proportion of performance-contingent CEO compensation. The implications of these findings for industry-level research in general, and research on CEO compensation in particular, are discussed.
No takes yet. Share an insight, caveat, or question.
Sydney Finkelstein (2009) studied this question.
Synapse has enriched 5 related papers. Consider them for comparative context: