Transformations  in
Business & Economics

MANAGEMENT POWER OR BOARD POWER? DETERMINANTS OF CEO COMPENSATION LEVELS AND STRUCTURE BASED ON A META-ANALYSIS
Xiaoying Wang, Canhua Kang, Zongyi Yin, Wenwen Yue

ABSTRACT. Studies on the determinants of chief executive officer (CEO) compensation are very rich, and the management power theory (MPT) covers the existing study results. However, the academic circles still have not reached a unified opinion on the CEO compensation decision and theoretical basis. To explore the determinants of the structure of the CEO compensation level, the influence of MPT on CEO compensation decision factors was analyzed by using the meta-analysis from three aspects: management power measurement, CEO compensation level and structure influence factors, and performance-compensation sensitivity. Results demonstrate that MPT has a significant predictive effect on the core variables of total cash and total compensation in CEO compensation factors. However, MPT has no significant effect on performance-compensation sensitivity, and a contested process exists between CEO power and board power. Moreover, CEO management power has cross-term utility in the CEO compensation decision-making process. When the board of directors has more power than the CEO, the board is more inclined to closely link CEO compensation to corporate performance, resulting in a higher proportion of CEO's risk pay and a lower proportion of cash compensation. This case continues until the CEO has the power to control the board, such as the CEO serving as the chairman of the board. CEO compensation levels are decisively influenced by MPT and have cross-term effects on CEO management authority. Conclusions are more sufficient than previous individual research findings, enrich the content of MPT, and make a positive contribution to management practice.

KEYWORDS:  executive compensation, management power theory, board power, meta-analysis.

JEL classification: F031, F061.