How much does performance matter? A meta-analysis of CEO pay studies

Through a meta-analytic review of the empirical literature on the determina nts of CEO pay, this study tests the hypothesized relationships between fir m size, performance, and CEO pay. We show that firm size accounts for more than 40% of the variance in total CEO pay, while firm performance accounts for less than 5% of the variance. We also show that pay sensitivities are r elatively similar for both changes in size (5% of the explained variance in pay) and changes in financial performance (4% of the explained variance in pay). The meta-analysis also suggests that moderator variables may play an important role, but,ve were unable to test for this. (C) 2000 Elsevier Sci ence Inc. All rights reserved.