P. David et al., THE EFFECT OF INSTITUTIONAL INVESTORS ON THE LEVEL AND MIX OF CEO COMPENSATION, Academy of Management journal, 41(2), 1998, pp. 200-208
This study investigated the influence of institutional investors on CE
O compensation policy. Results suggest that institutional owners that
have only an investment relationship with a firm influence compensatio
n in accordance with shareholder preferences to (1) lower its level an
d (2) increase the proportion of long-term incentives in total compens
ation; However, institutions that depend on a firm for their own busin
ess are not able to influence compensation in this manner. This study
extends prior research by supporting the viewpoint that the nature of
ownership in a firm is an important determinant of CEO compensation.