Journal of Financial and Quantitative Analysis Vol. 52 No. 2 2017

The Effect of Labor Unions on CEO Compensation

Qianqian Huang^1,2,3,4; Feng Jiang^1,2,3,4; Erik Lie^1,2,3,4; Tingting Que^1,2,3,4

¹ University of Iowa · ² City University of Hong Kong · ³ University at Buffalo, State University of New York · ⁴ University of Alabama in Huntsville

Abstract

We find evidence that labor unions affect chief executive officer (CEO) compensation. First, we find that firms with strong unions pay their CEOs less. The negative effect is robust to various tests for endogeneity, including cross-sectional variations and a regression discontinuity design. Second, we find that CEO compensation is curbed before union contract negotiations, especially when the compensation is discretionary and the unions have a strong bargaining position. Third, we report that curbing CEO compensation mitigates the chance of a labor strike, thus providing a rationale for firms to pay CEOs less when facing strong unions.

DOI

10.1017/s0022109017000072

Volume

52

Issue

2

Pages

553-582

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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