The fit between CEO compensation design and firm risk

Janice S. Miller, Robert M. Wiseman, Luis Gomez-Mejia

Research output: Contribution to journalArticle

139 Citations (Scopus)

Abstract

We examined the effects of unsystematic and systematic firm risk on CEO compensation risk bearing and total pay. Both the proportion of variable pay in CEO pay packages and their magnitude are curvilinearly related to unsystematic firm risk - that is, they are highest under conditions of moderate firm-specific risk. Our results are consistent with agency theory predictions that both performance-contingent pay and the greater earnings potential associated with that form of pay are highest when an agent has greater control over performance outcomes.

Original languageEnglish (US)
Pages (from-to)745-756
Number of pages12
JournalAcademy of Management Journal
Volume45
Issue number4
StatePublished - Aug 2002
Externally publishedYes

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Bearings (structural)
Signal filtering and prediction
Compensation and Redress
Firm risk
CEO compensation
Variable pay
CEO pay
Agency theory
Prediction
Proportion

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Business and International Management
  • Management of Technology and Innovation
  • Strategy and Management

Cite this

The fit between CEO compensation design and firm risk. / Miller, Janice S.; Wiseman, Robert M.; Gomez-Mejia, Luis.

In: Academy of Management Journal, Vol. 45, No. 4, 08.2002, p. 745-756.

Research output: Contribution to journalArticle

Miller, Janice S. ; Wiseman, Robert M. ; Gomez-Mejia, Luis. / The fit between CEO compensation design and firm risk. In: Academy of Management Journal. 2002 ; Vol. 45, No. 4. pp. 745-756.
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