Regulatory constraints on executive compensation
This paper explores the influence of economic regulation on the level and structure of executive compensation. We find substantial and persistent differences in CEO compensation between firms subject to economic regulation and those in unregulated industries. CEOs of regulated firms are paid substan...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/50194 |
| _version_ | 1826198098330779648 |
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| author | Joskow, Paul L. Rose, Nancy L. Shepard, Andrea |
| author2 | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. |
| author_facet | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Joskow, Paul L. Rose, Nancy L. Shepard, Andrea |
| author_sort | Joskow, Paul L. |
| collection | MIT |
| description | This paper explores the influence of economic regulation on the level and structure of executive compensation. We find substantial and persistent differences in CEO compensation between firms subject to economic regulation and those in unregulated industries. CEOs of regulated firms are paid substantially less, on average, than their counterparts in the unregulated sector. In particular, in the electric utility industry, the sector which is most tightly regulated and for which we have the most data, CEOs average only 30% to 50% of the compensation earned by the CEO of a comparable firm in the unregulated sector. Compensation in the regulated sector tends to be more heavily weighted toward salary and cash and away from incentive-based forms of pay (such as stock options), and tends to be less responsive to variations in firm financial performance. The pattern of compensation discounts across industries, over time, and between firms in the electric utility industry is broadly consistent with the presence of binding political constraints on executive pay, as medicated through the regulatory process. |
| first_indexed | 2024-09-23T10:58:48Z |
| format | Working Paper |
| id | mit-1721.1/50194 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T10:58:48Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/501942019-04-12T23:31:09Z Regulatory constraints on executive compensation Joskow, Paul L. Rose, Nancy L. Shepard, Andrea Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. This paper explores the influence of economic regulation on the level and structure of executive compensation. We find substantial and persistent differences in CEO compensation between firms subject to economic regulation and those in unregulated industries. CEOs of regulated firms are paid substantially less, on average, than their counterparts in the unregulated sector. In particular, in the electric utility industry, the sector which is most tightly regulated and for which we have the most data, CEOs average only 30% to 50% of the compensation earned by the CEO of a comparable firm in the unregulated sector. Compensation in the regulated sector tends to be more heavily weighted toward salary and cash and away from incentive-based forms of pay (such as stock options), and tends to be less responsive to variations in firm financial performance. The pattern of compensation discounts across industries, over time, and between firms in the electric utility industry is broadly consistent with the presence of binding political constraints on executive pay, as medicated through the regulatory process. Supported by the MIT Center for Energy and Environmental Policy Research, the Olin Foundation, the National Science Foundation, and a Sloan Foundation Fellowship. 2009-12-15T23:58:57Z 2009-12-15T23:58:57Z 1993 Working Paper 93006 http://hdl.handle.net/1721.1/50194 35719627 MIT-CEEPR (Series) ; 93-006WP. 55, 12 p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Joskow, Paul L. Rose, Nancy L. Shepard, Andrea Regulatory constraints on executive compensation |
| title | Regulatory constraints on executive compensation |
| title_full | Regulatory constraints on executive compensation |
| title_fullStr | Regulatory constraints on executive compensation |
| title_full_unstemmed | Regulatory constraints on executive compensation |
| title_short | Regulatory constraints on executive compensation |
| title_sort | regulatory constraints on executive compensation |
| url | http://hdl.handle.net/1721.1/50194 |
| work_keys_str_mv | AT joskowpaull regulatoryconstraintsonexecutivecompensation AT rosenancyl regulatoryconstraintsonexecutivecompensation AT shepardandrea regulatoryconstraintsonexecutivecompensation |