SIFR Research Report Series, Institute for Financial Research
Do Entrenched Manager Pay Their Workers More?
(), Fredrik Heyman, Mattias Nilsson, Helena Svaleryd and Jonas Vlachos
Abstract: We present evidence on whether managerial entrenchment
affects workers' pay, using a large panel dataset that matches public firms
with detailed data on their subsidiaries and workers. We find that CEOs
with a stronger grip on control pay their workers higher wages, but CEO
ownership of cash flow rights mitigates such behavior. Unionized workers
and executives are found to get a larger share of the higher pay. These
findings do not seem to be driven by productivity differences or reverse
causality, and are robust to a series of robustness checks. Our evidence is
consistent with an agency model in which entrenched managers pay higher
wages because they come with direct private benefits for the manager, such
as lower-effort wage bargaining and better CEO-employee relations, and
suggests more broadly an important link between the corporate governance of
large public firms and labor market outcomes.
Keywords: Corporate governance; agency problems; private benefits; matched employer-employee data; wages; (follow links to similar papers)
JEL-Codes: G32; G34; J31; (follow links to similar papers)
47 pages, September 15, 2006
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