Linking Societal Trust and CEO Compensation

46 Pages Posted: 13 May 2016

See all articles by Kiridaran (Giri) Kanagaretnam

Kiridaran (Giri) Kanagaretnam

York University - Schulich School of Business

Rahman Khokhar

Saint Mary's University, Canada - Department of Finance, Information Systems & Management Science

Amin Mawani

York University - Department of Accounting

Date Written: March 14, 2016

Abstract

We examine the association between societal trust and the levels of CEO compensation and the proportion of equity-based compensation of 897 firm-years from 18 countries over the 2007- 2013 period. We find both the levels of CEO compensation as well as the proportion of equity based compensation to be lower in countries with higher levels of societal trust. This suggests that costly regulations on CEO compensation may not be as necessary in jurisdictions with higher levels of societal trust. We also examine the association between pay disparity and societal trust. Consistent with our finding of lower pay at the CEO rank, we find pay disparities are lower in countries with higher levels of societal trust.

Keywords: Trust, CEO Pay, Culture, Income Disparity

JEL Classification: G30, G35, J33, J38, M41, M52

Suggested Citation

Kanagaretnam, Kiridaran and Khokhar, Abdul Rahman and Mawani, Amin, Linking Societal Trust and CEO Compensation (March 14, 2016). Available at SSRN: https://ssrn.com/abstract=2779301 or http://dx.doi.org/10.2139/ssrn.2779301

Kiridaran Kanagaretnam (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Abdul Rahman Khokhar

Saint Mary's University, Canada - Department of Finance, Information Systems & Management Science ( email )

Halifax, Nova Scotia B3H 3C3
Canada

Amin Mawani

York University - Department of Accounting ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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