A number of factors exert significant influences on levels of executive pay In small firms. For example, CEOs of larger firms generally earn larger compensation than do CEOs of smaller firms. Similarly, more profitable firms tend to pay their CEOs more than do less profitable firms. Where survey data are used to prescribe compensation levels In small firms, the analyst must ascertain that comparability of circumstances exists. Otherwise, the compensation prescribed may fall short of the competitive level required to attract and retain competent managers. The present study suggests the addition of an “age effect” to be considered along with other factors In evaluating salary data.
