Social Ties, CEO Compensation, and Mutual Fund Voting Patterns

1 Introduction The social relationship between the parties seems to be important for financial transactions. Cohen, Frazzini, and Malloy (2008) have shown that companies trading at mutual fund portfolio managers invest in companies with social relationships with them (especially in terms of education) better than other transactions It shows that it is. A portfolio manager of a company that has no social relationship with them. In this article we will investigate whether the types of social relations studied by Cohen, Frazzini, and Malloy (2008) are also related to executive compensation.

Since the 1990s, the CEO's salary in the United States has exceeded the company's profits, economic growth, and the average wage of all workers. Between 1980 and 2004, John Bogle, the founder of the mutual fund, CEO's compensation increased 8.5% from the previous year, corporate profit growth rate was 2.9% / year, per capita income growth rate 3.1% It was estimated. By 2006, the CEO was 400 times the average number of employees - 20 times that of 1965. In principle, as the company gets bigger, the CEO 's compensation plan will grow bigger.

The CEO of the largest company salary grows much faster than the stock price, corporate profits and wages of up to 0.1%. But the most important difference is the difference between CEO salary and typical employee salary. From 1978 to 2015, the CEO's compensation increased by 941%, but typical worker compensation was only 10% (the annual salary of major industry workers is represented by sample). The graph represents the salary disparity between the CEO and the employee by tracking the ratio of CEO's compensation to representative employee compensation. In 1965, the chief executive of a major US company gained 20 times more income than ordinary workers, but this ratio rose to 59: 1 by 1989 and in the latter half of the 1990s I recovered. Since 2000, two stock markets have collapsed, the CEO's stock-related wage has decreased and the CEO's compensation has decreased

The chart at the top of the 201613 chart shows the difference between the current economy and the current economy.

It is still premature to decide if this trend is the beginning of a declining trend in CEO's compensation. Is this a sign of our era, do you need greater transparency? The CEO's compensation is weakening because it is closely related to the stock price - is the stock price now weakening as the market falls? Today's global economic situation, coupled with rising consumer awareness of unreasonable wages, may ultimately distort the political will to rectify this situation. At least the discussion may change the focus of the business. Kets de Vries says that: "Next-generation CEOs are more creative thinking about the challenges companies face in building sustainable business, which is timely."