Using data on US public firms, I uncover a strong and positive correlation between executive compensation and labor expenses. On average, a 1% increase in the wage bill translates into a 0.3% raise in total executive pay. This association is driven by wages rather than by employment growth, is stronger for the incentive than for the salary component of executive compensation, and is particularly pronounced in the financial sector.
Executive Compensation and Labor Expenses
Colonnello, Stefano
2020-01-01
Abstract
Using data on US public firms, I uncover a strong and positive correlation between executive compensation and labor expenses. On average, a 1% increase in the wage bill translates into a 0.3% raise in total executive pay. This association is driven by wages rather than by employment growth, is stronger for the incentive than for the salary component of executive compensation, and is particularly pronounced in the financial sector.
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