Toward a general model for executive compensation

Abstract

Purpose This paper aims to review the growing literature on the issues and variables which are impacting the determination of CEO pay for Fortune 500 and other large organizations. While many previous researchers have focused on agency theory, CEO power, market forces and board of directors governance as the most relevant issues, the authors seek to propose a general model for determining CEO pay which has a more comprehensive set of variables. Design/methodology/approach The paper draws on existing literature to derive the variables for the proposed model. Findings The bulk of the literature reviewed takes an Anglo‐American point‐of‐view on the best way to manage CEO pay. There is a need for a more “balanced” and broader perspective on how to motivate CEO behavior with the needs of other stakeholders. Originality/value The paper provides new insights into the dynamic nature of CEO motivation and governance and by designing a general model, integrates divergent points of view into a more holistic body of knowledge.