How does organizational structure affect executive compensation?

ABSTRACT

Does the rise of the CFO as the second-ranked executive increase the status of the CEO? We find that, as a CFO becomes #2, a CEO receives higher pay in relative terms compared with other top executives. This result corresponds to the literature on span-of-control of executives in top management team.

KEYWORDS:

• CFO
• CEO-Pay-Slice
• top management team
• executive pay
• corporate governance

JEL CLASSIFICATION:

• G30
• G34

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ ‘Divisional manager’ includes the head of the business segment, of the regional segment and of the group or subsidiary. Chief include Chief Information Officer, Chief Marketing Officer, Chief Technology Officer, Chief Legal Officer, Chief Credit Officer and so on except CFO and intermediaries. Chief positions contact the CEO directly, but their span-of-control is not as broad as intermediaries.

² When intermediaries are #2, the CPS/OPS decreases by 4.3%.

³ Our results remain robust when we include industry and year fixed effect.

Additional information

Funding

This work was supported by the research fund of Hanyang University(HY-2013)