Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives

Stefania Albanesi, Claudia Olivetti and María José Prados

No 2015-004, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: We document three new facts about gender differences in executive compensation. First, female executives receive lower share of incentive pay in total compensation relative to males. This difference accounts for 93% of the gender gap in total pay. Second, the compensation of female executives displays lower pay-performance sensitivity. A $1 million dollar increase in firm value generates a $17,150 increase in firm-specific wealth for male executives and a $1,670 increase for females. Third, female executives' compensation is more sensitive to bad firm performance and less sensitive to good firm performance. We find no link between firm performance and the gender of top executives. We discuss evidence on differences in preferences and the cost of managerial effort by gender and examine the resulting predictions for the structure of compensation. We consider two paradigms for the pay-setting process, the efficient contracting model and the "managerial power" or skimming view. The efficient contracting model can explain the first two facts. Only the skimming view is consistent with the third fact. This suggests that the gender differentials in executive compensation may be inefficient.

Keywords: sensitivity; performance incentives; managerial power; skimming; efficient contracts (search for similar items in EconPapers)
JEL-codes: J31 J41 M12 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-bec, nep-cta, nep-hrm and nep-lma
Note: FI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/albane ... _2015_executives.pdf First version, March, 2015 (application/pdf)

Related works:
Working Paper: Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives (2015)
Working Paper: Gender and dynamic agency: theory and evidence on the compensation of top executives (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hka:wpaper:2015-004

Access Statistics for this paper

More papers in Working Papers from Human Capital and Economic Opportunity Working Group Contact information at EDIRC.
Bibliographic data for series maintained by Jennifer Pachon ().