Optimal incentive-based compensation contracts for CEOs: The moderating roles of age and tenure

Authors

  • Joshua R. Aaron Middle Tennessee State University
  • Amy McMillan East Carolina University
  • Timothy C. Dunne Middle Tennessee State University

Keywords:

Executive compensation, Agency theory

Abstract

This study examines the relationship between CEO compensation packages and firm performance. We suggest that CEO age and tenure moderate the relationship between the aforementioned variables. Our results indicate that younger and newly minted CEOs perform better with greater proportions of incentive-based compensation than their older and longer tenured counterparts.  These findings suggest CEOs respond differently to different compensation packages. Therefore, firms should evaluate the characteristics of their CEOs prior to designing the compensation package.   

Author Biographies

Joshua R. Aaron, Middle Tennessee State University

Assistant Professor

Management & Marketing Department

Jones College of Business

MTSU

Amy McMillan, East Carolina University

Associate Professor

Department of Management

College of Business

ECU

Timothy C. Dunne, Middle Tennessee State University

Assistant Professor

Management & Marketing Department

Jones College of Business

MTSU

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Published

2016-02-08

Issue

Vol. 6 No. 1 (2015)

Section

ABR Journal Articles

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