We analyzed the influence of legal nature (publicly traded or privately held companies) on executive compensation. For this purpose, we used data from the Annual Social Information Report (RAIS) of Brazilian publicly traded and privately held companies for the year 2019, totalling 15,397 observations. Through various econometric approaches, it was observed that legal nature has an impact on executive compensation. Using ordinary least squares regression, it was found that executives in publicly traded companies receive, on average, about 30% more than their counterparts in privately held companies. This difference was also evident in estimations using quantile regression, re-centred influence function (RIF)-regression and Oaxaca-RIF. However, the difference diminishes at higher levels of compensation. By means of the Oaxaca–Blinder decomposition, the average compensation difference due to legal nature was found to be 26.9% in favour of publicly traded companies. Of this difference, the largest portion is attributed to discretionary factors. When analyzing an economic, institutional and cultural context different from what is commonly researched, this research contributes to the discussion of results in emerging economies and provides new insights that can be valuable in the development of standards encouraging compensation linked to value creation for the company, as well as promoting greater transparency regarding the reasons behind high remuneration.
AdamsS. M., GuptaA., HaughtonD. M., & LeethJ. D. (2007). Gender differences in CEO compensation: Evidence from the USA. Women in Management Review, 22(3), 208–224. https://doi.org/10.1108/09649420710743662
2.
AguiarA. B. D., & PimentelR. C. (2017). Remuneração de executivos e desempenho no mercado brasileiro: relações contemporâneas e defasadas. Revista de Administração Contemporânea, 21(4), 545–568. https://doi.org/10.1590/1982-7849rac2017160228
3.
AskerJ., Farre-MensaJ., & LjungqvistA. (2015). Corporate investment and stock market listing: A puzzle?The Review of Financial Studies, 28(2), 342–390. https://doi.org/10.1093/rfs/hhu077
4.
BanghøjJ., GabrielsenG., PetersenC., & PlenborgT. (2010). Determinants of executive compensation in privately held firms. Accounting & Finance, 50(3), 481–510. https://doi.org/10.1111/j.1467-629X.2009.00335.x
5.
BeckD., FriedlG., & SchäferP. (2020). Executive compensation in Germany. Journal of Business Economics, 90, 787–824. https://doi.org/10.1007/s11573-020-00978-y
6.
BertrandM., & HallockK. F. (2001). The gender gap in top corporate jobs. ILR Review, 55(1), 3–21. https://doi.org/10.1177/001979390105500101
7.
BeurenI. M., PamplonaE., & LeiteM. (2020). Remuneração dos executivos e desempenho em empresas brasileiras familiares e não familiares. Revista de Administração Contemporânea, 24, 514–531. https://doi.org/10.1590/1982-7849rac2020190191
8.
BhideA. (1993). The hidden costs of stock market liquidity. Journal of Financial Economics, 34(1), 31–51. https://doi.org/10.1016/0304-405X(93)90039-E
9.
BootA. W., GopalanR., & ThakorA. V. (2006). The entrepreneur’s choice between private and public ownership. The Journal of Finance, 61(2), 803–836. https://doi.org/10.1111/j.1540-6261.2006.00855.x
10.
BouteskaA., & Mefteh-WaliS. (2021). The determinants of CEO compensation: New insights from United States. Journal of Applied Accounting Research, 22(4), 663–686. https://doi.org/10.1108/JAAR-08-2020-0176
11.
BrahmanaR. K., LohH. S., & KontesaM. (2020). Market competition, managerial incentives and agency cost. Global Business Review, 21(4), 937–955. https://doi.org/10.1177/0972150919853476
12.
CameronA. C., & TrivediP. K. (2010). Microeconometrics using Stata. Stata Press.
13.
CanaceT. G., CianciA. M., LiuX. K., & TsakumisG. T. (2020). Paid for looks when others are looking: CEO facial traits, compensation, and corporate visibility. Journal of Business Research, 115, 85–100. https://doi.org/10.1016/j.jbusres.2020.04.039
14.
Chief Executive Group. (2014). Pay gap widens between public and private CEOs. http://chiefexecutive.net/widening-gap-public-private-company-ceo-pay/
15.
ColeR. A., & MehranH. (2016). What do we know about executive compensation at small privately held firms?Small Business Economics, 46(2), 215–237. https://doi.org/10.1007/s11187-015-9689-2
16.
ConnellyB. L., HoskissonR. E., TihanyiL., & CertoS. T. (2010). Ownership as a form of corporate governance. Journal of Management Studies, 47(8), 1561–1589. https://doi.org/10.1111/j.1467-6486.2010.00929.x
17.
ConyonM. J., & MurphyK. J. (2000). The prince and the pauper? CEO pay in the United States and United Kingdom. The Economic Journal, 110(467), 640–671. https://doi.org/10.1111/1468-0297.00577
18.
CornelliF., KominekZ. W., & LjungqvistA. (2012). Monitoring managers: Does it matter?Journal of Finance, 68(2), 431–481. http://dx.doi.org/10.2139/ssrn.1507762
19.
CorreiaT. S., & MonteP. A. (2017). Diferenças de remuneração entre os sexos dos executivos da área de saúde. Ninsaúde.
20.
CrosslandC., & HambrickD. C. (2011). Differences in managerial discretion across countries: how nation‐level institutions affect the degree to which CEOs matter. Strategic Management Journal, 32(8), 797–819. https://doi.org/10.1002/smj.913
21.
DegenhartL., da CostaD. D. L. C., & HeinN. (2017). Desempenho econômico-financeiro e remuneração dos diretores executivos das empresas brasileiras. Enfoque: Reflexão Contábil, 36(3), 118–135. https://doi.org/10.4025/enfoque.v36i3.33129
22.
DuongL., & EvansJ. (2016). Gender differences in compensation and earnings management: Evidence from Australian CFOs. Pacific-Basin Finance Journal, 40, 17–35. https://doi.org/10.1016/j.pacfin.2016.07.004
23.
EdgertonJ. (2012). Agency problems in public firms: Evidence from corporate jets in leveraged buyouts. The Journal of Finance, 67(6), 2187–2213. https://doi.org/10.1111/j.1540-6261.2012.01784.x
24.
EisenhardtK. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74. https://doi.org/10.5465/amr.1989.4279003
25.
ErmelM. D. A., & MedeirosV. (2019). Plano de remuneração baseado em ações: uma análise dos determinantes da sua utilização. Revista Contabilidade & Finanças, 31, 84–98. https://doi.org/10.1590/1808-057x201907620
26.
FernandesF. C., & MazzioniS. (2015). A correlação entre a remuneração dos executivos e o desempenho de empresas brasileiras do setor financeiro. Contabilidade Vista & Revista, 26(2), 41–64.
FirthM., FungP. M., & RuiO. M. (2007). How ownership and corporate governance influence chief executive pay in China’s listed firms. Journal of Business Research, 60(7), 776–785. https://doi.org/10.1016/j.jbusres.2007.01.014
29.
FismanR. J., KhuranaR., Rhodes-KropfM., & YimS. (2014). Governance and CEO turnover: Do something or do the right thing?Management Science, 60(2), 319–337. https://doi.org/10.1287/mnsc.2013.1759
30.
FournierJ. M., & KoskeI. (2012). Less income inequality and more growth–are they compatible? Part 7. The drivers of labour earnings inequality–an analysis based on conditional and unconditional quantile regressions. OECD.
31.
GabaixX., & LandierA. (2008). Why has CEO pay increased so much? The Quarterly Journal of Economics, 123(1), 49–100. https://doi.org/10.1162/qjec.2008.123.1.49
32.
GanH., ParkM. S., & SuhS. (2020). Non-financial performance measures, CEO compensation, and firms’ future value. Journal of Business Research, 110, 213–227. https://doi.org/10.1016/j.jbusres.2020.01.002
33.
GaoH., & LiK. (2015). A comparison of CEO pay–performance sensitivity in privately-held and public firms. Journal of Corporate Finance, 35, 370–388. https://doi.org/10.1016/j.jcorpfin.2015.10.005
34.
GaoH., HarfordJ., & LiK. (2017). CEO turnover–performance sensitivity in private firms. Journal of Financial and Quantitative Analysis, 52(2), 583–611. https://doi.org/10.1017/S0022109017000126
35.
GaoH., LiK., & LemmonM. L. (2012). Are CEOs in public US firms overpaid? New evidence from private firms. New Evidence from Private Firms. http://dx.doi.org/10.2139/ssrn.1572406
36.
GaoH., HarfordJ., & LiK. (2013). Determinants of corporate cash policy: Insights from private firms. Journal of Financial Economics, 109, 623–639.
37.
GhaniA. N. A., MartelancR., & KayoE. K. (2015). Há diferença de restrição de crédito para empresas de capital aberto e fechado no Brasil? Evidência empírica pela abordagem do cash flow sensitivity. Revista Contabilidade & Finanças, 26, 85–92. https://doi.org/10.1590/1808-057x201400260
38.
GeorgeG. (2005). Slack resources and the performance of privately held firms. Academy of Management Journal, 48(4), 661–676. https://doi.org/10.5465/amj.2005.17843944
39.
HairJ. F.Jr, WilliamB., BabinB., & AndersonR. E. (2009). Análise multivariada de dados (6th ed.). Bookman.
40.
HambrickD. C., & QuigleyT. J. (2014). Toward more accurate contextualization of the CEO effect on firm performance. Strategic Management Journal, 35, 473–491. https://doi.org/10.1002/smj.2108
41.
HoH., KimN., & RezaS. (2022). CSR and CEO pay: Does CEO reputation matter?Journal of Business Research, 149, 1034–1049. https://doi.org/10.1016/j.jbusres.2022.04.055
42.
HofstedeG. (1980). Motivation, leadership, and organization: Do American theories apply abroad?Organizational Dynamics, 9(1), 42–63.
43.
HofstedeG., HofstedeG. J., & MinkovM. (2010). Cultures and organizations: Software of the mind (3rd ed.). McGraw-Hill.
44.
JensenM. C., & MecklingW. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
45.
KhursheedA., & SheikhN. A. (2022). Determinants of CEO compensation: Evidence from Pakistan. Corporate Governance: The International Journal of Business in Society, 22(6), 1222–1242. https://doi.org/10.1108/CG-06-2020-0218
46.
KoenkerR. (2005). Quantile regression. Cambridge University Press.
47.
KrauterE. (2013). Remuneração de executivos e desempenho financeiro: um estudo com empresas brasileiras. Revista de Educação e Pesquisa em Contabilidade (REPeC), 7(3), 259–273. https://doi.org/10.17524/repec.v7i3.988
48.
LeeH., ParkJ., & ChungC. C. (2022). CEO compensation, governance structure, and foreign direct investment in conflict-prone countries. International Business Review, 31(6), 102031. https://doi.org/10.1016/j.ibusrev.2022.102031
49.
LiQ., LiT., ChenH., XiangE., & RuanW. (2019). Executives’ excess compensation, legitimacy, and environmental information disclosure in Chinese heavily polluting companies: The moderating role of media pressure. Corporate Social Responsibility and Environmental Management, 26(1), 248–256. https://doi.org/10.1002/csr.1676
50.
LiangH., RenneboogL., & SunS. L. (2015). The political determinants of executive compensation: Evidence from an emerging economy. Emerging Markets Review, 25, 69–91. https://doi.org/10.1016/j.ememar.2015.04.008
51.
LinD., KuoH. C., & WangL. H. (2013). Chief executive compensation: An empirical study of fat cat CEOs. The International Journal of Business and Finance Research, 7(2), 27–42. https://ssrn.com/abstract=2149110
52.
MurphyK. J. (1999). Executive compensation. In CardD. & AshenfelterO. (Eds.), Handbook of labor economics (Vol. 3, pp. 2485–2563). Elsevier. http://dx.doi.org/10.1016/S1573-4463(99)30024-9
53.
MurphyK. J. (2013). Executive compensation: Where we are, and how we got there. InHandbook of the economics of finance (Vol. 2, pp. 211–356). Elsevier. https://doi.org/10.1016/B978-0-44-453594-8.00004-5
54.
OaxacaR. (1973). Male-female wage differentials in urban labor markets. International Economic Review, 14(3), 693–709. https://doi.org/10.2307/2525981
55.
OliveiraN. G., VieiraL. K., & da CunhaJ. V. A. (2021). Remuneração do chief executive officer (CEO) e criação de valor em empresas brasileiras listadas no IBRX 100. Revista Contemporânea de Contabilidade, 18(49), 38–55. https://doi.org/10.5007/2175-8069.2021.e78381
56.
OzkanN. (2007). Do corporate governance mechanisms influence CEO compensation? An empirical investigation of UK companies. Journal of Multinational Financial Management, 17(5), 349–364. https://doi.org/10.1016/j.mulfin.2006.08.002
57.
PerrymanA. A., FernandoG. D., & TripathyA. (2016). Do gender differences persist? An examination of gender diversity on firm performance, risk, and executive compensation. Journal of Business Research, 69(2), 579–586. https://doi.org/10.1016/j.jbusres.2015.05.013
58.
QuigleyT. J., & HambrickD. C. (2015). Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America’s attention to corporate leaders. Strategic Management Journal, 36, 821–830. https://doi.org/10.1002/smj.2258
59.
QuigleyT. J., ChiricoF., & BaùM. (2021). Does the CEO effect on performance differ in private versus public firms?Strategic Organization, 20(3), 652–73. https://doi.org/10.1177/14761270211018183
60.
RamseyerJ. M., NakazatoM., & RasmusenE. B. (2009). Public and private firm compensation compared: Evidence from Japanese tax returns. The Korean Economic Review, 25(1), 5–33.
61.
RissattiJ. C., BorbaJ. A., Martins Dias MaragnoL., & PauloE. (2022). Determinantes para aprovação do pacote de remuneração dos executivos por parte dos acionistas. Revista De Educação E Pesquisa Em Contabilidade (REPeC), 16(1). https://doi.org/10.17524/repec.v16i1.2959
62.
SahakiantsI., & FestingM. (2019). The use of executive share-based compensation in Poland: Investigating institutional and agency-based determinants in an emerging market. The International Journal of Human Resource Management, 30(6), 1036–1057. https://doi.org/10.1080/09585192.2016.1172652
63.
SouzaP. V. S. D., CardosoR. L., & VieiraS. S. D. C. (2017). Determinantes da remuneração dos executivos e sua relação com o desempenho financeiro das companhias. Revista Eletrônica de Administração (Porto Alegre), 23, 4–28. http://dx.doi.org/10.1590/1413-2311.175.63859
64.
The World Bank. (2016). Listed domestic companies, total. http://data.worldbank.org/indicator/CM.MKT.LDOM.NO
65.
VasconcelosA. F., & MonteP. A. (2013). A remuneração de executivos e o desempenho financeiro das empresas brasileiras. Registro Contábil, 4(1), 1–18.
66.
VitoriaR., BressanA. A., & IquiapazaR. A. (2020). As empresas estatais necessitam de um fator de prêmio de risco? Brazilian Business Review, 17, 488–505. http://dx.doi.org/10.15728/bbr.2020.17.5.1
67.
WangX., KangC., YinZ., & YueW. (2021). Management power or board power? Determinants of CEO compensation levels and structure based on a meta-analysis. Transformations in Business & Economics, 20, 905.
68.
WinschelJ. (2022). Mapping the determinants of carbon-related CEO compensation: A multilevel approach. Society and Business Review, 17(2), 160–195. https://doi.org/10.1108/SBR-06-2021-0085
69.
YarramS. R., & AdapaS. (2021). Does family ownership matter in executive pay design? Personnel Review, 50(3), 880–899. https://doi.org/10.1108/PR-04-2019-0164
