Pay, Performance, and Turnover of Bank CEOs

A new data set covers chief executive officers (CEOs) of large commercial banks over the period 1982-87. For newly hired CEOs, the elasticity of pay with respect to assets is about one-third. For continuing CEOs, the change in compensation depends on performance, as measured by stock and accounting returns. The sensitivity of pay to performance diminishes with experience, but the returns are not filtered for peer-group returns. Logit regressions relate the probability of CEO departure to age and performance, as measured by stock returns filtered for peer-group returns; CEO experience does not influence this relationship.

[1]  Herbert A. Simon,et al.  The Compensation of Executives , 1957 .

[2]  E. Lazear.  Why Is There Mandatory Retirement? , 1979, Journal of Political Economy.

[3]  Kevin J. Murphy.  Incentives, learning, and compensation: a theoretical and empirical investigation of managerial labor contracts , 1986 .

[4]  Thomas M Carroll,et al.  The Determinants of Executive Salaries: An Econometric Survey , 1980 .

[5]  Abbie J. Smith,et al.  An Empirical-Investigation Of The Relative Performance Evaluation Of Corporate-Executives , 1986 .

[6]  E. Lazear,et al.  Rank-Order Tournaments as Optimum Labor Contracts , 1979, Journal of Political Economy.

[7]  Richard T. Selden,et al.  Capitalism and Freedom: Problems and Prospects (Proceedings of a Conference in Honour of Milton Friedman). , 1977 .

[8]  Bengt Holmstrom,et al.  Moral Hazard in Teams , 1982 .

[9]  Michael Keren,et al.  The Internal Organization of the Firm and the Shape of Average Costs , 1983 .

[10]  M. Weisbach.  Outside directors and CEO turnover , 1988 .

[11]  Kevin J. Murphy,et al.  Corporate performance and managerial remuneration: An empirical analysis , 1985 .

[12]  Sherwin Rosen,et al.  Authority, Control, and the Distribution of Earnings , 1982 .

[13]  Kevin J. Murphy,et al.  Performance Pay and Top Management Incentives , 1990 .

[14]  Anne T. Coughlan,et al.  Executive compensation, management turnover, and firm performance: An empirical investigation , 1985 .

[15]  Jerold B. Warner,et al.  Stock prices and top management changes , 1988 .

[16]  Bengt Holmstrom,et al.  Moral Hazard and Observability , 1979 .

[17]  Martin J. Beckmann,et al.  Some Aspects of Returns to Scale in Business Administration , 1960 .