How does CEO Compensation in U.S Corporations Compare with European and British Firms? A Review of the Literature

Abstract

During the past 10 years, it has been speculated that the international  differences or “pay gap” between the compensation of chief executive officers (CEOs) in the U.S. and that of their foreign counterparts has significantly decreased. The growing similarity has been a result of widespread internationalization (international diversity of the board and foreign institutional ownership, investor demand, and sales) and Americanization of non-U.S. firms (directors with U.S. board experience and U.S. institutional ownership, cross-listings, and acquisitions) (Fernandes et al., 2012, p.348). This paper will examine the growing similarity in CEO compensation across countries. Various determinants of CEO compensation will be examined, including: governmental regulations, shareholder interest in light of the board of directors and an executive’s institutional ownership, stock options, the size of a firm in light of sales revenue and profit and the number of employees in a firm, and bonus plans. The research will look at the parallel in compensation of CEOs in the U.S. with those in the UK, Germany, and Japan and its adaptation throughout the years.