An empirical investigation of the role of subjective performance assessments versus objective performance indicators as determinants of ceo compensation

Fanny Caranikas-Walker, Sanjay Goel, Luis R. Gómez-Mejía, Robert L. Cardy, Arden Grabke Rundell

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

The empirical support for agency theory explanations for the great variance in CEO pay has been equivocal. Drawing from the performance appraisal literature, we hypothesize that boards of directors incorporate human judgment into the evaluation and reward of CEO performance in order to balance managerial risk with agency costs. We test Baysinger and Hoskisson’s (1990) proposition that insider-dominated corporate boards rely on subjective performance evaluation to reward the CEO, and we argue that R&D intensity influences this relationship. Using a sample of Fortune firms, findings support our contention that human judgment is important in evaluating and rewarding CEO performance.

Original languageEnglish (US)
Pages (from-to)7-25
Number of pages19
JournalManagement Research
Volume6
Issue number1
DOIs
StatePublished - Jan 1 2008
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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