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How Much Does Performance Matter? A Meta-Analysis of CEO Pay Studies
Henry L. Tosi
University of Florida and SDA Bocconi
Steve Werner
University of Houston
Jeffrey P. Katz
Kansas State University
Luis R. Gomez-Mejia
Arizona State University
Through a meta-analytic review of the empirical literature on the determinants of CEO pay, this study tests the hypothesized relationships between firm size, performance, and CEO pay. We show that firm size accounts for more than 40% of the variance in total CEO pay, while firm performance accounts for less than 5% of the variance. We also show that pay sensitivities are relatively similar for both changes in size (5% of the explained variance in pay) and changes in financial performance (4% of the explained variance in pay). The meta-analysis also suggests that moderator variables may play an important role, but we were unable to test for this.
Journal of Management, Vol. 26, No. 2,
301-339 (2000)
DOI: 10.1177/014920630002600207
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