THE EFFECT OF INSTITUTIONAL INVESTORS ON THE LEVEL AND MIX OF CEO COMPENSATION

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.