| Abstract: | Despite decades of research, how CEO compensation is determined remains an enigma. Drawing on agency, managerial hegemony, and institutional theoretical perspectives, we use hierarchical linear modelling—a multilevel analytic technique—to examine how firm‐, industry‐, and time‐level effects drive CEO compensation in US corporations. Results show that while cash salary is mostly driven by firm‐specific factors, equity‐based compensation responds to time‐level effects with firm‐ and industry‐level effects playing a marginal role. We argue that such evidence is consistent with the institutionalization of the CEO compensation determination process through the widespread adoption of benchmark peer‐group comparisons. Such practices underlie economy‐wide changes in CEO compensation that are increasingly disconnected from other fundamental firm‐ or industry‐specific factors. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd. |
