chapter  7
14 Pages

Executive compensation in an international context: The role of informal and formal institutions

WithKATALIN TAKACS HAYNES

In 2002, US CEOs made 23 times as much as CEOs in mainland China, ten times as much as CEOs in India, nine times as much as CEOs in Taiwan, five times as much as CEOs in Japan and two to four times as much as their counterparts in Spain, the United Kingdom, France, Italy, the Netherlands, Germany and Switzerland (Towers Perrin, 2002). Why does CEO pay vary so much across countries? Exploring the individual, firm and industry determinants of CEO pay has led to a rich research stream on CEO pay, yet even CEOs who manage similarly sized firms and compete in the same global industries often have different pay. As examples, in 1998 the CEO of Dutch Unilever received $2.4M in compensation, while the CEO of US-based Colgate Palmolive received $52.7M; in 1999 the CEO of Eriksson received $1.1M, compared to the CEO of Motorola who received $58.9M (Anderson et al., 1999). Clearly, the answer to the question “what contributes to the disparity in executive pay across countries?” is not merely individual, firm or industry variables.