CEO Pay with Perks
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This paper develops an equilibrium matching model for a competitive CEO market in which CEOs’
wage and perks are both endogenously determined by bargaining between firms and CEOs. In stable matching
equilibrium, firm size, wage, perks and talent are all positively related. Perks are more sensitive than
wage to changes in firm size if there are economies of scale in the cost of providing perks.
Productivity-related perks provide common value by increasing both the CEO’s productivity and utility
while non productivity-related perks provide private value by increasing the CEO’s utility only. The more
perks enhance the CEO’s productivity, the faster perks increase in firm size. We test the predictions of
the model using information on CEO wage and perks for S&P 500 companies and find consistent empirical evidence.