THE EFFECTS OF OWNERSHIP STRUCTURE ON CONDITIONS AT THE TOP - THE CASE OF CEO PAY RAISES

We examine how ownership configuration affects the determination of CEO pay raises. Based on a sample of 188 firms over a 5-year period, it was found that pay raises were based on distinctly different factors, depending on the ownership profile of the firm. In management-controlled firms-where no single major owner exists-results suggest an overarching pay philosophy: maximize CEO pay, subject to demonstration of face legitimacy of that pay. In externally-controlled firms-where a major (nonmanager) owner exists-results suggest a very different philosophy: minimize CEO pay, subject to the ability to attract/retain a satisfactory CEO.