Determining total CEO compensation of selected US public companies

The purpose of this paper is to explore the effects of total assets, stock performances, CEOs’ tenures, ages, and board sizes on total CEO compensations of 249 publicly listed US companies over a nine-year period from 2004-2012.

Pedroni’s panel cointegration, generalized method of moments, and dynamic ordinary least squares methodologies are applied.

All variables are non-stationary in log-levels. The findings show significant positive effects of total assets and stock performances on total CEO compensations. The effects of CEO’s tenure and age as well as board size on total CEO compensation deem negative. However, short-run net interactive feedback effects are generally positive with some exceptions.

The above variables matter in rewarding the CEOs. They should be carefully weighed in for proper formulation of CEO compensation policy.

This paper applies relatively new econometric tools for a large panel data set. This work considers some new variables for determining CEO compensation in USA. The findings are relatively new with empirical originality.