Power, Policy, and the Compensation of Top Executives

Authors

Keywords:

corporate governance, income inequality, executive compensation, power, comparative politics, interest groups, public policy, income distribution, inequality, labor power, manager power, executive power, political power, interest group power, power resource theory

Abstract

This article contributes to the quantitative analysis of international differences in executive compensation with a novel emphasis on the role of political drivers—specifically, labor power, owner power, and executive power—while controlling for market factors. It leverages nested analysis, pairing a 2016 cross-sectional analysis of 179 firms in 20 countries with case studies of Finland, from 1971 to 2017, and the United States, from 1936 to 2016. The 2016 cross-sectional analysis of the world's largest firms finds market forces are important, but leave a large portion of international differences in top executive compensation unexplained. Also important are labor power and executive power. Similarly, while controlling for market forces, the longitudinal case studies of large firms in the US and Finland each find stronger labor power relative to executive power associated with lower executive pay. The theoretical framework advanced in this paper helps to explain why top CEO pay—and consequent top-end income inequality—are each extreme in certain countries and periods, and modest in others.

Author Biographies

Lane Kenworthy, University of California, San Diego

Professor of Sociology and Yankelovich Chair in Social Thought

University of California, San Diego

Mikael Nygård, Åbo Akademi University

Professor of Social Policy

Åbo Akademi University, Finland

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Published

2022-06-12

How to Cite

Rosenblum, J., Kenworthy, L., & Nygård, M. (2022). Power, Policy, and the Compensation of Top Executives. Journal of Income Distribution®, 1. Retrieved from https://jid.journals.yorku.ca/index.php/jid/article/view/40474

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