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Nulla, Yusuf Mohammed, D.Phil., Ph.D., MSc, MBA, B.Comm.
Abstract—This study investigated CEO compensation system of NYSE Financial Services companies. It tested the relationship between CEO compensation, firm size, accounting firm performance, and corporate governance, from 2005 to 2010. The totaled of twenty five companies were selected through random sample method from NYSE index companies. The research question for this study was: is there a relationship between CEO compensation, firm size, accounting firm performance, and corporate governance?. To answer this question, nine statistical models were created and tested. It was found that, overall, there was a relationship between CEO salary, CEO bonus, CEO total compensation, firm size, accounting firm performance, and corporate governance. The correlations between CEO salary, CEO total compensation, and firm size were ranged from weak to good positive ratios. The correlation between CEO bonus and firm size was found to be weak positive. The correlations between CEO salary, CEO bonus, CEO total compensation, firm performance, and CEO power, were found to be ranged from weak to strong mixed ratios.
Keywords: CEO Compensation, Accounting Performance, Firm Size, Corporate Governance, CEO Power,Financial Services Companies, NYSE Compensation, and CEO Bonus.
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he purpose of this research is to understand in-depth CEO compensation system of NYSE energy companies. In addi- tion, over the past decade, United States public had raised
concerns over bonuses declared to CEOs by their board of di-
rectors. The failure to understand the determinants of CEO
compensation by the public had led to blame CEOs of rent
grabbing; misused of its power towards board; and monopoli-
zation of compensation system. Thus, these ever growing concerns bring to the foreground conclusion the need to fur- ther study in depth at least one important sector of American economy, namely Financial Services sector, in terms of prima- ry relationship and resulting dynamics between CEO compen- sation, firm size, accounting firm performance, and corporate governance.
The CEOs and other executives would like to elimi-
nate the risk exposure in their compensation packages by de-
coupling their pay from performance and linking it to a more
stable factor, firm size. This strategy indeed deviates from ob- taining the optimum results from principal-agent contracting. In general, previous studies had found a strong relationship between CEO compensation and firm size but the correlation results were ranged from nil to strong positive ratios. The var- iables used in previous studies as a proxy for firm size were either total sales, total number of employees, or total assets. Therefore, firm size needs to be studied with CEO cash com- pensation in greater detail such as using both total sales and total number of employees.
The most researched topics in the executive compen-
sation are between CEO compensation and firm performance. Although executive compensation and firm performance had been the subject of debate amongst academic, but there was little consensus on the precise nature of the relationship as such, further researched in greater detail need to be conducted to understand in finer terms the true extent of the relationship between them. As such, this research had unprecedentedly used eight variables to attest with CEO compensation, that is, return on assets (ROA), return on Equity (ROE), earnings per share (EPS), cash flow per share (CFPS), net profit margin (NPM), book value per common stock outstanding (BVCSO), and market value per common stock outstanding (MVCSO).
The relationship between CEO compensation and corporate governance (CEO Power) was not attested exten- sively in the past, especially in Canada. In fact, only few credi- ble researched papers were written. That is, CEO power only had been the subject of recent focus among researchers, pri- marily due to the effect of researchers had failed to find the strong relationship between CEO compensation, firm size, and firm performance. The variables used in previous studies as a proxy for corporate governance such as, CEO age; CEO ten- ure; and CEO turnover, were found to have negligible to weak relationship with CEO compensation. In addition, third party data collection, different population samples such as industry and market, and use of different statistical methods, all had led to a divergence in results. Therefore, corporate governance needs to be studied with CEO compensation on an extensive basis such as using, CEO age, CEO stocks outstanding, CEO stock value, CEO tenure, CEO turnover, management 5 per-
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cent ownership, and individuals/institutional 5 percent own- ership.
Prasad (1974) believed that executive salaries appear to be far more closely correlated with the scale of operations than its prof- itability. He also believed that executive compensation is primari- ly a reward for previous sales performance and is not necessarily an incentive for future sales efforts. McEachern (1975) believed that executives are risk averse. They can reduce or eliminate risk exposure in their compensation package by linking it to a more stable factor, firm size. Gomez-Mejia, Tosi, and Hinkin (1987) believed that firm size is a less risky basis for setting executives’ pay than performance, which was subject to many uncontrollable forces outside the managerial sphere of influence. Deckop (1988) believed that a strong sales compensation relationship would suggest that CEOs are given an incentive to maximize size rather than profitability. Tosi and Gomez-Mejia (1994) believed that measurement of firm size is the composite score of standardized values of reported total sales and number of employees. Gomez- Mejia and Barkema (1998) defined the relationship between CEO compensation and firm size as “positive”. That is, CEOs in large companies make higher income than CEOs in small companies. This is supported by Finkelstein and Hambrick (1996), who be- lieved that firm size is related to the level of executive compensa- tion. This is further supported by Murphy (1985), who find that holding value of a firm constant, firm whose sales grow by 10% will increase CEO salary or bonus between 2% and 3% Therefore, it shows that size pay relation is causal, and CEOs can increase their pay by increasing firm size, even when increase in size re- duces the firm’s market value. Shafer (1998) shown that pay sen- sitivity, which measured as change in CEO wealth per dollar and change in firm value, falls with the square root of firm size. That is, CEO incentives are 10 times higher for a $10 billion firm than for a $100 million firm.
According to previous studies conducted in the United States and the United Kingdom, CEO compensation is believed to be weakly related to firm performance. Loomis (1982) argued that pay is unrelated to performance. Henderson and Fredrickson (1996), and Sanders and Carpenter (1998, 2002) argued that CEO total pay may be unrelated to performance but it related to organiza- tional complexity they manage. Likewise, studies conducted by Murphy (1985), Jensen and Murphy (1990), and Joskow and Rose (1994) find similar conclusions.
Jensen and Murphy (1990) argued that incentive align- ment as an explanatory agency construct for CEO pay is weakly supported at best. That is, objective provisions of principal agent contract are not comprehensive enough to effectively create a direct link between CEO pay and performance. They find that pay performance sensitivity for executives is approximately $3.25 per $1000 change in shareholder wealth, small for an occupation in which incentive pay is expected to play an important role. This is supported by Tosi, Werner, Katz, and Gomez-Mejia (2000),
who find that overall ratio of change in CEO pay and change in financial performance is 0.203, an accounting for about 4% of the variance. This weak relationship is explained by Borman & Mo- towidlo (1993) and Rosen (1990), who stated that archival per- formance data focuses only on a small portion of a CEO’s job per- formance requirements as such, it is difficult to achieve a robust conclusion.
According to Jensen and Murphy (1990) who believed that CEO bonuses are strongly tied to an unobservable perfor- mance measure. They believed that if bonuses depend on per- formance measures observable only to the board of directors, they could have provided a significant incentive. They believed that one way to detect the existence of such phantom perfor- mance measures are to examine the magnitude of year to year fluctuations in CEO compensation. They believed that such fluc- tuations signifies CEO pay is unrelated to accounting perfor- mance. In addition, they argued that although bonuses represent
50% of CEO salary, such bonuses are awarded in ways that are not highly sensitive to performance. And the variation in CEO pay can be explained by changes in accounting profits than stock market value. Overall, they believed that pay performance sensi- tivity remains insignificant.
Jensen and Murphy (1990) find in their study that CEO received an average pay increase of $31,700 in years when share- holders earned a zero return, and received an average additional
1.35¢ per $1,000 increase in shareholder wealth. These findings are comparable to those of Murphy (1985 and 1986), Coughlan and Schmidt (1985), and Gibbons and Murphy (1990), who find that pay performance elasticity of approximately 0.1, indicating, salaries and bonuses increased by about 1% for every 10% rise in the value of the firm. In addition, they find an average pay in- crease of CEOs whose stockholders gains $400 million is $37,300, compared to an average pay increase of CEO whose stockhold- ers lose $400 million is $26,500. These findings are supported by Jensen and Murphy (1990), who believed that CEO cash com- pensation should be structured to provide big rewards for out- standing performance and meaningful penalties for poor perfor- mance. In addition, they believed that the relationship between CEO cash compensation and firm performance would be less troubling if CEO owned a large percentage of corporate equity. Gilson and Vetsuypens (1993) argued that the association be- tween pay and performance is small in economic terms when performance is measured in terms of changes rather than levels. This is supported by Iyengar (2000) who argued that changes in CEOs compensation are unrelated to changes in firms’ perfor- mance perhaps due to stockholders in poorly performing firms would like to adopt a cautious wait and see attitude, to assess whether a change in performance is permanent before rewarding senior managers. This is further supported by Antle and Smith (1986), who find no relation between CEO cash compensation and firm performance. However, these statements are contradict- ed by Jensen and Zimmerman (1985), who stated that evidences are inconsistent with a view that executive compensation is unre- lated to firm performance and enriches managers at the expense of shareholders. This is supported by Gibbons and Murphy (1990), who find that CEO pay changes by about 1.6% for each
10% of return on common stock. That is, the CEO pay structure is positively and significantly related to firm performance, as meas-
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ured by the rate of return on common stock. This is supported by Lambert and Larcker (1987) and Sloan (1993), who find that there is a positive relation between CEO compensation and stock re- turns. According to Blanchard, Lopez-de-Silanes and Shleifer (1994), Iyengar, Raghavan J. (2000), and Bertrand and Mullaina- than (2001), who stated that CEO cash compensation increases when firm profits rise for reasons that have nothing to do with managers’ efforts. Murphy (1986) believed that top executives are worth every nickel they get.
According to Jensen and Murphy (1990), voting power of CEO
includes CEO and his immediate family stock ownership and the
percentage of stocks over which CEO has a sale or shared power
to direct the voting. It is believed that CEO’s in large firms tend
to own less stock and have less compensation based incentives
than CEOs in small firms. This is supported by Jensen and Mur-
phy (1990), who find that as a percentage of total corporate val-
ue, CEO stock ownership has never been high in large compa-
nies. That is, there exists a small and insignificant positive coeffi-
cient of ownership interaction variable, which implied that the
relation between compensation and performance is independent
of an executive’s stock holdings. In addition, according to their earlier (1989) study, they find that median CEO of one of nation’s
250 largest public companies own shares just over $2.4 million, less than 0.07% of the company’s market value. In addition, they find that 9 out of 10 CEOs own less than 1% of their company’s stock, and 1 in 20 CEOs own more than 5% of the company’s outstanding stocks. Overall, they find that CEOs receive about
50% of their base pay in the form of bonuses. Their study is based on sampling of 73 manufacturing firms during a 15 year period. This is supported by Cyert, Kang, and Kumar (2002), who find a negative correlation between large stockholders and CEO com- pensation. That is, doubling percentage ownership of external stakeholders reduces non salary compensation by 12% to 14%. This is contradicted by an earlier study conducted by Mehran (1995), who find a positive relationship between the percentage of total cash (salary and bonus) compensation and the percentage of stocks hold by managers. His study is based on one year collec- tion of data. Ungson and Steers (1984) believed that firms where CEOs have large stock ownership and long tenure, they can largely shape their pay. Similarly, Finkelstein and Hambrick (1988) believed that the relative power of a CEO may affect the height of the hurdles that are set to qualify for contingent pay. In addition, they believed that strong family’s position in the firm will increase executive’s power. Moreover, they find that CEO compensation and CEO stock ownership are related in an invert- ed U-shaped manner, compensation highest in situations where CEO stock ownership is characterized as moderate. That is, the point of inflection happened when CEO stock ownership reached about 9 percent in the first 18 years, beyond that, salaries started to decline due to tax preference of incurring capital gains over current income. Bertrand and Mullainathan (2000) find that CEOs at firms lacking five percent (or larger) stock ownership tend to receive more luck based pay, that is, pay associated with profit increases that are entirely generated by external factors rather than by CEOs’ efforts. In addition, they also find that firms that
have fewer external stakeholders, CEO cash compensation is marginally reduced when option based compensation is in- creased.
Murphy (1986) stated that CEO performance is influ- enced by CEO tenure. That is, he believed that increased CEO tenure may promote principal trust of an agent and in turn agent will take actions in the principal’s interest. Similarly, Sigler (2011) finds that CEO tenure appears to be an important variable in de- termining the level of CEO compensation. His examination is based on two hundred and eighty firms listed on the New York Stock Exchange from 2006 to 2009. In addition, Finkelstein and Hambrick (1989) believed that CEO tenure is thought to have a positive link with compensation. That is, pay steadily increase as CEO gains and solidify power over-time. However, they find in their study that such a relationship is not observed between CEO tenure and CEO pay. As such, they then decided to conduct addi- tional testing, cross sectional associations of CEO compensation and CEO tenure, and have found that there is an existence of a curvilinear relationship, a U-shaped pattern. That is, CEO tenure increases pay up to 18 years and then it started to decline gradu- ally. They have provided two possible explanations for this curvi- linear relationship. Firstly, they believed that power accrues for a while and then diminishes due to CEO’s reduced mobility in the managerial labor market, or due to his evolution into a figure- head with one or two younger high priced executives carry the actual weight of a CEO’s job. Secondly, they believed that execu- tives reached a point where they prefer stock over cash compen- sation. This could occur because of changes in family and finan- cial circumstances. This supposition is supported when they have examined two sub samples and have found that stock compensa- tion carries a higher proportion of total compensation. As such, they believed that CEO tenure increases a shift in pay mix from cash to stock earnings, support the notion that personal circum- stances influence pay. In addition, they believed that long CEO tenure will create opportunity to recruit sympathetic board members for CEOs. In addition, they find that the average tenure of a CEO is significantly lower in externally controlled firms (2.96 years) than management-controlled firms (5.92 years). Thus, they believed that the boards of externally controlled firms may not need to pay from profitability because CEO tenure is dependent on the owner’s satisfaction with CEO performance. Their study is based on a sample size of sixty companies. Pfeffer (1981) believed that the creation of a personal mystique which may induce un- questioned deference or loyalty, can be expected to occur when CEO power becomes institutionalized in the organization.
Deckop (1988) argued that CEO age has little effect on CEO compensation. However, Finkelstein and Hambrick (1989) find an inverted U-shaped relationship between CEO age and CEO cash compensation, indicating, CEO cash compensation increases until CEO reached the age of 59 years and then it starts to decline. This is consistent with the view that earnings over time is in line with CEO’s need for cash, which tends to drop off as he or she gets older due to no major expenditures to incur such as, house and child rearing expenses. This is supported by McKnight et al. (2000), who find that CEO compensation is positively relat- ed to a certain age, but it starts to decline afterward. This is fur- ther supported by Weir (2000), who finds that the relationship between CEO salaries and CEO age are significantly related but
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have weakened over time, and the relationship between CEO age and CEO bonus appears nonlinear in nature. That is, at about age
53, the proportion of bonus as a percentage of salary begins to decrease at an increase rate. On the other hand, according to Gib- bons and Murphy (1992), who finds that CEO age is a well recog- nized determinant of compensation and have shown to be signif- icantly related to CEO pay.
Jensen and Murphy (1990) find that CEO turnover prob- abilities are negatively and significantly related to changes in stockholder wealth. In addition, they concluded that the dismis- sals were simply not an important source of CEO incentives. Gil- son and Vetsuypens (1990) examined the nature of compensation packages for financially distressed firms. They found that within a small sample of financially distressed firms, when a turnover occurs, insider replacement CEOs were paid substantially less than their predecessors, but outsider replacement CEOs were paid substantially more. Similarly, Murphy and Oyer (2002) find that outside CEO replacements receive higher compensation than inside CEO replacements. That is, outside replacement CEOs, at median, typically make $335,360 more than their predecessors while inside CEOs are typically paid only $126,156 more than their predecessors. Brickley (2003) concluded that firm perfor- mance continues to explain very little variation of CEO turnover. Overall, despite literature consisted of excellent theoretical dis- cussions on this topic, yet it lacked consistent empirical studies on the relationship between CEO compensation and CEO turno- ver.
This research had adopted quantitative research method as it is the method to be used for historical data collection and descrip- tive studies. The longitudinal study approach had been selected under quantitative research methodology to study corporate fi- nancial records from 2005 to 2010. The random sampling method had been selected for this research to obtain total sample popula- tion of twenty five companies from NYSE index. For statistical tests, CEO compensation was assigned as dependent variable; firm size was assigned as control variable and independent vari- able; and CEO performance and corporate governance had been assigned as independent variables. Each sub-variables of CEO compensation had been used separately to test with all sub- independent variables of firm size, firm performance, and corpo- rate governance. The total of nine models were created to address this research question. The survey method had been adopted as it is the most appropriate approach to collect historical data. The historical data of sampled companies had been obtained from TMX Group Inc. and CDS Inc. The inferential statistics-based methodology, which is very instrumental to this quantitative re- search, had been used to obtain statistical results. The 95 percent confidence level will be assumed for all statistical tests.
The above ANOVA table 1 results were based on linear regression tests. It had shown that there was a relationship between CEO salary, CEO bonus, CEO total compensation, firm size, firm per- formance, and corporate governance, except for relationship be- tween CEO bonus and corporate governance. The first, second, and third models between CEO salary, CEO bonus, CEO total compensation, and firm size were, .202, .046 and .430 respectively, as such characterized as weak to moderate models. Thus, it had illustrated that firm size had a weak impact on short-term CEO compensation and as such, was more favorable towards long-term CEO compensation structure. The fourth, fifth, and sixth models between CEO salary, CEO bonus, CEO total compensation, and accounting performance were .292, .929, and .913 respectively, as such characterized as moderate to strong models. That is, ac- counting performance had a moderate effect on CEO salary and strong effect on CEO bonus and total compensation, indicated that rewards were designed and weighted heavily with account- ing performance. The seventh, eight, and nine models between CEO salary, CEO bonus, CEO total compensation, and corporate governance were .303, .039, and .244 respectively, as such charac- terized as weak to moderate models. That is, corporate govern- ance had a moderate effect on CEO salary, however, it had a weak effect on CEO bonus and total compensation.
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Common
Stock
Salary | Bonus | Total Com- pensation | |
Total Sales | 0.37 | -0.212 | 0.543 |
Total Em- ployees | 0.207 | -0.192 | 0.268 |
The above table 2 illustrated that the correlation results between CEO salary, bonus, total compensation, and firm size. It had shown that there was a weak to moderate positive correlations existed between CEO salary, total sales, and total employees. That is, the correlation were .370 and .207, respectively. On the other hand, the correlations between CEO bonus, total sales, and total employees were weak negative ratios. That is, they were -.212 and -.192, respectively, indicated that firm size was totally ig- nored and in fact had a negative effect towards determining CEO bonus. The correlations between CEO total compensation, total sales, and total employees were ranged from weak to good posi- tive ratios. That is, they were .543 and .268, respectively, indicated that CEO total compensation structure had some degree of influ- ence by firm size.
Table 3 – Correlations (CEO Compensation vs. Firm Perfor- mance)
The above table 3 illustrated the correlation results between CEO salary, bonus, total compensation, and firm performance. It had shown that there was a weak to moderate mixed correlations between CEO salary, return on assets (ROA), return on equity (ROE), earnings per share (EPS), cash flow per share (CFPS), net profit margin (NPM), common stock outstanding (CSO), book value of common Stock (BVCS), and market value of common stock (MVCS). That is, it illustrated that the correlations between them were -.078, .190, -.012, .180, .003, .066, .217, and .407. Thus, it signified that among balance sheets involved items such as return on assets, return on equity, and cash flow per share, influence to CEO salary was characterized as weak negative to weak positive ratios, perhaps due to CEO salary contract gives less importance to assets and related returns. Similarly, in the net earnings related items such as earnings per share, net profit margin, common stock outstanding, book value per common share, and market value per common share, influence to CEO salary was character- ized as weak to moderate positive ratios.
It was found that there was a weak negative to strong positive correlations between CEO bonus, return on assets (ROA), return on equity (ROE), earnings per share (EPS), cash flow per share (CFPS), net profit margin (NPM), common stock outstanding (CSO), book value of common stock (BVCS), and market value of common stock (MVCS). That is, it illustrated that the correlations between them were, -.078, .144, .039, -.044, .290,
.146, .344, and .818. Thus, it indicated that among the balance
sheets involved items such as return on assets, return on equity,
and cash flow per share, the influence to CEO bonus was charac-
terized as weak negative to weak positive ratios. Similarly, in the
net earnings related items such as earnings per share, net profit margin, common stock outstanding, book and market values per common share, the influence to CEO bonus was characterized as weak to strong positive ratios. That is, accounting ratios were insignificant except to market price of share, indicated that CEO Bonus had been influenced by market activities.
The correlations between CEO total compensa-
tion, return on assets (ROA), return on equity (ROE), earnings per
share (EPS), cash flow per share (CFPS), net profit margin (NPM),
common stock outstanding (CSO), book value of common stock
(BVCS), and market value of common stock (MVCS), were char- acterized as weak to strong positive ratios. That is, it illustrated that the correlations between them were, .027, .213, .060, .118,
.386, .226, .383, and .770. Thus, it indicated that among balance sheets involved items such as return on assets, return on equity, and cash flow per share, the influence to CEO total compensation
was also characterized as weak positive ratios. Similarly, net earn- ings related items such as earnings per share, net profit margin, common stocks outstanding, book and market values per com- mon share, had a weak to strong positive ratios. Thus, overall, equity related earnings had a material influence towards CEO compensation.
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4.3CEO COMPENSATION AND CORPORATE GOVERN- ANCE
Table 4 – Correlations (CEO Compensation vs. Corporate Gov- ernance)
Salary | Bonus | Total Compen- sation | |
CEO Age | 0.151 | -0.017 | 0.14 |
CEO Shares Out- standing | -0.10 | -0.054 | -0.181 |
CEO Share Value | 0.272 | 0.056 | 0.249 |
CEO Tenure | 0.026 | 0.013 | 0.217 |
CEO Turnover | 0.165 | -0.047 | 0.017 |
MGMT. 5% own- ership | 0.287 | 0.031 | -0.198 |
INDV./I NST. 5% owner- ship | -0.178 | 0.15 | 0.177 |
The above table 4 illustrated the correlation results between CEO salary, bonus, total compensation, and CEO corporate govern- ance. It had shown that there was a weak negative to weak posi- tive correlations existed between CEO salary, CEO Age, CEO shares outstanding, CEO shares value, CEO tenure, CEO turno- ver, 5 percent management ownership, and 5 percent individu- al/institutional ownership. That is, correlations between CEO salary and corporate governance were .151, -.100, .272, .026, .165,
.287, and -.178, respectively. The positive correlations were relat- ed to CEO age, CEO share value, CEO tenure, CEO turnover,
and management 5 percent ownership, indicated that CEO expe- rience, market share price, duration of CEO service, and man- agement controlled of the firm, all had some level of influence to board of directors in determining CEO salary. The negative corre- lations between CEO salary, CEO shares ownership, and indi- vidual/institutional 5 percent ownership indicated that level of CEO equity and non-management ownership control were not considered by the board.
The correlations between CEO bonus and corporate gov- ernance were -.017, -.054, -.056, -.013, -.047, .031, and -.150, respec-
tively. That is, the correlations were ranged from weak negative to weak positive ratios, except to CEO shares outstanding, indi- cated that non-accounting performance factors or CEO contract completely ignored corporate governance factors. That is, the board again ignored experience level of CEO, duration of CEO’s service, CEO stocks ownership and value, and ownership struc- ture, towards determining CEO bonus.
The correlations between CEO total compensation and corporate
governance were .140, -.181, .249, .217, .017, -.198, and .177, re-
spectively. That is, the correlations between CEO total compensa-
tion, CEO age, CEO share value, CEO tenure, CEO turnover, and
5 percent individual/institutional ownership were found to be weakly positive. On the other hand, the correlations between CEO total compensation, CEO shares outstanding, and 5 percent management ownership had weak negative ratios. Overall, cor- porate governance had a weak influence on CEO compensation mainly due to strong influence of firm size and accounting firm performance.
Overall, there was a relationship existed between CEO salary, CEO bonus, CEO total compensation, firm size, accounting firm performance, and corporate governance. The correlations be- tween CEO salary, CEO bonus, CEO total compensation, and firm size were ranged from weak negative to strong ratios. The correlations between CEO salary, CEO bonus, CEO total com- pensation, and accounting performance were ranged from weak negative to strong positive ratios. The correlations between CEO salary, CEO bonus, CEO total compensation, and corporate gov- ernance, were ranged from weak negative to weak positive ratios.
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H0: There is no relationship between CEO compen- sation, firm size, accounting firm performance, and corporate governance in NYSE Financial Services companies.
H1: There is a relationship between CEO compen-
sation, firm size, accounting firm performance, and corporate governance in NYSE Financial Services companies.
To address this Operational Hypothesis Statement, sep- arate models were developed for each dependent vari- able:
Salary: Y1=c+ B1X1+B2X2+ϵ
Bonus: Y2=c+ B1X1+B2X2+ϵ
(Y1=Salary; Y2=Bonus; c=constant predictor;
B1=influential factor for Total Sales; B2=influential fac-
tor for Total Number of Employees; and ϵ=error). (X1=Value of Total Sales; X2=Value of Total Number of Employees).
Let X1=Value of ROA; X2=Value of ROE; X3=Value of EPS; X4=Value of CFPS; X5=Value of NPM; X6=Value of CSO; X7=Value of BVCSO; B8=Value of MVCSO.
Bonus: Y6=c+ B1X1+B2X2+B3X3+B4X4+B5X5+B6X6+B7X7+ ϵ (Y5=Salary; Y6=Bonus; c=constant predictor; B1=influential factor for the CEO Age; B2=influential factor for CEO Shares Outstanding; B3=influential fac- tor for CEO Shares Value; B4=influential factor for CEO Tenure; B5=influential factor for CEO Turnover; B6=influential factor for 5 percent Management Shares Ownership; B7= influential factor for 5 percent Individ- ual/Institutional Ownership; and ϵ=error).
Let X1=Value of CEO Age; X2=Value of CEO Shares
Outstanding; X3=Value of CEO Shares Value; X4=Value of CEO Tenure; X5=Value of CEO Turnover; X6=Value of 5 percent Management Shares Ownership; and X7=Value of 5 percent Individual/Institutional Ownership.
All the thirty six models assumed to have a confidence
level (α) of 5 percent.
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