EXECUTIVE COMPENSATION AND FIRM SIZE: AN AGENCY PERSPECTIVE

Abstract

The relationship between the amount of executive compensation and the size of the firm has long been a disputed area of economics. Baumol (1959) was among the first to observe that firm size and executive compensation appear to be positively correlated. This view was further supported by the works of McGuire, Chin and Elbing (1962), Ciscel (1974), and Walkling & Long (1984). Other studies (see e.g., Lewellen and Huntsman (1970) have contended that profit maximization is the principal determinant of variations in executive compensation. More recently, a debate has raged in the popular press as to whether executives of the auto industry deserve the largest salaries recently awarded them (see e.g., Fortune 1984).

Citation

GORMAN, R.F. (1986), "EXECUTIVE COMPENSATION AND FIRM SIZE: AN AGENCY PERSPECTIVE", Studies in Economics and Finance, Vol. 10 No. 1, pp. 60-71. https://doi.org/10.1108/eb028663