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Colloquium with Kuochih Huang: Do Incentivized Managers Pay Their Workers Less?

February 24 @ 12:00 pm - 1:00 pm

A man in a suit sits reading the business section of a newspaper

Since the 1980s, Chief Executive Officers’ (CEO) pay has exploded, largely in the form of equity-based incentive compensation such as stock awards and options. Using a two-tiered principal-agent model, we show that aligning managers’ incentives with shareholder interests through equity-based pay can lower workers’ wages. Analyzing a sample that matches firm, manager, and worker information in the U.S. economy over the period 1992-2016, we show that higher equity-based pay is associated with lower average wages across various measures of pay and model settings. Using a novel instrumental-variable strategy based on a tax policy change, we provide evidence that an increase in the CEO equity-to-salary ratio by one unit, say, from 1:1 to 2:1, leads to a 4% decline in the average wage. We also find that while firms under all degrees of competition raise equity pay in response to the policy change, the negative impact on wages is stronger when the degree of competition is high, suggesting that competition does not substitute for executive compensation but amplifies its effect. Read the full paper.

Please kindly RSVP by February 19th for us to guarantee your lunch.

About the Speaker

Kuochih Huang is a Ph.D. candidate in Economics, University of Massachusetts Amherst.

Details

Date:
February 24
Time:
12:00 pm - 1:00 pm
Event Category:

Organizer

Labor Center
Phone:
(510) 642-0323
Email:
laborcenter@berkeley.edu
Website:
http://laborcenter.berkeley.edu/

Venue

IRLE Director’s Room
2521 Channing Way
Berkeley, CA 94720 United States
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