This paper is an investigation of the pay-for-performance link in executive compensation. In particular, we document main issues in the pay–performance debate and explain practical issues in setting pay as well as data issues including how pay is disclosed and how that has changed over time. We also provide a summary of the state of CEO pay levels and pay mix in 2009 using a sample of over 2,000 companies and describe main data sources for researchers. We also investigate what we believe to be at the root of fundamental confusion in the literature across disciplines – methodological issues. In exploring methodological issues, we focus on empirical specifications, causality, fixed-effects, first-differencing, and instrumental variable issues. We then discuss two important but not yet well-explored areas, international issues, and compensation in non-profits. We conclude by examining a series of research areas where further work can be done, within and across disciplines.
Florin, B., Hallock, K.F. and Webber, D. (2010), "Executive pay and firm performance: methodological considerations and future directions", Liao, H., Martocchio, J.J. and Joshi, A. (Ed.) Research in Personnel and Human Resources Management (Research in Personnel and Human Resources Management, Vol. 29), Emerald Group Publishing Limited, Bingley, pp. 49-86. https://doi.org/10.1108/S0742-7301(2010)0000029004Download as .RIS
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