Business, Management and Accounting
4 years ago

CEO compensation in Australia driven by demand for quality, not rent extraction.

The British Accounting Review
The determinants of CEO compensation: Rent extraction or labour demand?
Keryn Chalmers, Ping‐Sheng Koh, G P Stapledon

Paper Summary

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CEO compensation in Australia is influenced by economic, governance, and ownership factors. Fixed salary and share-based compensation reflect a firm's need for a high-quality CEO, while bonuses and options can be used by CEOs to extract rent, especially in smaller firms or those with above-average performance. However, this rent extraction is not significant and does not last beyond one year. This is different from the US, where CEO rent extraction through compensation is more prevalent, economically impactful, and enduring.