Something old, something new: culture and CEO compensation revisited

Abstract

Purpose

This study is a replication of Tosi and Greckhamer's work examining how uncertainty avoidance, power distance, individualism and masculinity/femininity are related to total CEO pay, the ratio of variable to total CEO pay and the ratio of CEO pay to the pay of the lowest level employees in 23 countries. Its main purpose is to investigate whether the replication confirms, questions or extends the results of TG2004.

Design/methodology/approach

Tosi and Greckhamer used generalized linear modeling (GLS) to analyze the relationships between Hofstede's four cultural dimensions and CEO compensation. In the replication, the author used GLS to retest the original seven hypotheses with more recent data from Hofstede and test the same hypotheses relying on cultural values and practices scores from the GLOBE study. Further, using firm-level data unavailable for the original study, the author analyzed fixed and random effects in mixed models.

Findings

The replication generally confirms the findings of the original study for the effects of power distance, individualism and masculinity on CEO total pay. Results are mixed or indicate the lack of significant effect for other relationships.

Research limitations/implications

This study reexamines the effects of country-level contextual variables in the area of CEO compensation.

Originality/value

The replication presents firm-level CEO compensation and firm performance data from 21 countries, extending the original study and unveiling possible spurious effects.

Citation

Takacs Haynes, K. (2014), "Something old, something new: culture and CEO compensation revisited", American Journal of Business, Vol. 29 No. 1, pp. 5-25. https://doi.org/10.1108/AJB-07-2013-0045