The Effect of Labor Unions on CEO Compensation

Qianqian Huang; Feng Jiang; Erik Lie; Tingting Que

doi:10.1017/S0022109017000072

The Effect of Labor Unions on CEO Compensation

Qianqian Huang, Feng Jiang, Erik Lie, Tingting Que^*

^*Corresponding author for this work

College of Business

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

70 Citations (Scopus)

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.

Original language	English
Pages (from-to)	553-582
Journal	Journal of Financial and Quantitative Analysis
Volume	52
Issue number	2
DOIs	https://doi.org/10.1017/S0022109017000072
Publication status	Published - Apr 2017

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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.",

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AB - 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.

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JO - Journal of Financial and Quantitative Analysis

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The Effect of Labor Unions on CEO Compensation

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