Global environment and factors affecting the salary of the CEO (chief executive officer) of a goods producing firm: an Econometric modeling approach using STATA

Aziz, Zohaib and Muhammad, Ahsanuddin and Hussain, Ghulam (2010): Global environment and factors affecting the salary of the CEO (chief executive officer) of a goods producing firm: an Econometric modeling approach using STATA.

Abstract

The flattening of the world thanks to the cluster of profound socio-economic and politico-cultural changes has created unprecedented challenges for organizational leadership and management. The fast evolving global world of ours where challenges have to be continually met requires timely decision taken by CEOs’ (Chief Executive Officers) who shape and give direction to world politics and economic order. In the light of this we have studied the decisions taken by CEOs’ of goods producing firms’ and their decisions on firm’s productivity and profitability which in turn depend to a great deal on CEOs’ salary structure. Better salary leads to influx of people from all over the world often leading to brain drain situation in developing countries. Globalization has created social disparities in the present economic system that are molded by the increasing polarization of work between people working in high paid knowledge sectors and others working in low paid sectors. Prior research has suggested that in a global environment capitalists benefit from other capitalists who pay higher salaries from the expansion of income.

The salary data of 177 CEOs’ (Chief Executive Officers) for the year 1990 – published in the Business Week of June 6, 1991 has been analyzed to determine and correlate the effects of sales, market value (mktval), profit and CEOs’ tenure (ceoten) on the CEOs’ salary. The performance of goods producing firms where the CEOs’ served has been found to be strongly correlated with their salary intakes. The basic purpose of this research and study is to analyze the deciding factor in the salaries of top executives. The CEOs’ are the policy makers in all government and non-governmental organizations and their decision-taking greatly influences the performances of their institution. CEOs’ performance with respect to their salaries and other variables mentioned above is found to be the deciding factor as regards policy execution matters in goods producing firm’s performances.

• Item Type: MPRA Paper
• Language: English
• Keywords: Econometric model; multicollinearity; STATA10; elasticity; employment tenure and market value
• Subjects: C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

References

[1] Business Week (5/6/91) data for population of chief executive officers containing information on 177 CEOs for the year 1990.

[2] Hanke, J. E. and Wichern, D. W. (2007) Business Forecasting, 8th ed., Pearson Education, Inc., p.58.

[3] http://www.stata.com/ and See, Baum, C. F. (2006) An Introduction to Modern Econometrics Using Stata. Stata Press.

[4] Hanke, J. E. and Wichern, D. W. (2007) Business Forecasting, 8th ed., Pearson Education, Inc. p. 285.

[5] Ibid.: Business Forecasting, 8th ed., Pearson Education, Inc., 2007, p.285.

[7] Gujarati, D. N. (2009) Basic Econometrics, 5th ed., New York: McGraw-Hill, p.328.

[8] Ibid.: Basic Econometrics, 5th ed., New York: McGraw-Hill, p.330.

[9] Ibid.: Basic Econometrics, 5th ed., New York: McGraw-Hill, p. 147.

[10] Ramanathan, R. (2008) Introductory Econometrics with Applications, 5th ed., South-Western, p. 270.

[11] Patterson, K. (2002) An Introduction to Applied Econometrics: A Time Series Approach. Palgrave, p. 203.