How Closely Is Ceo Compensation Tied to Performance? an Examination of the U.S. Restaurant Industry

Abstract

The purpose of this research is to assess the elasticity of CEO compensation in the U.S. restaurant industry. Using a sample of 30 restaurant firms for the years 1993 through 2006, we find that a 1% increase in current year firm return yields an increase of approximately .43% for salary, bonus and stock options, .20% for salary and bonus and 2.74% for bonus and options. Mergers do not appear to impact CEO compensation significantly. Our findings are within the range found by many previous researchers.

Does risk matter in CEO compensation contracting? Evidence from US restaurant industry

“…This finding is confirmative to previous research showing a positive association between pay and performance (Veliyath and Bishop, 1995;Barber et al, 2006;Dalbor et al, 2010). The firm risk variable (Risk) has a positive coefficient (0.1634) implying a greater total compensation for the CEO as the level of firm risk increases for a restaurant company.…”

“…In the same vein, Kim and Gu (2005) examine the determinants of CEO pay in the US restaurant industry and report that firm size is the major determinant of CEO's total cash compensation. Dalbor et al (2010) examine the restaurant industry and provide evidence of a market performance effect on the CEO's total compensation. In a more recent study, Guillet et al (2012) examine the executive compensation in the restaurant industry and report varying results for CEO, senior executive officers and board members.…”

CEO Overconfidence and the Effects of Equity-Based Compensation on Strategic Risk-Taking in the U.S. Restaurant Industry

“…However, there has been little attempt to investigate the association between managerial risk behaviors, compensation, and strategic investments in the hospitality literature. Several studies have investigated the determinants of CEO cash compensation in the restaurant and casino firms (Dalbor, Oak, & Rowe, 2010; Gu & Choi, 2004; Guillet, Kucukusta, & Xiao, 2011; Kim & Gu, 2005). Other studies have focused on assessing the relationship between CEO compensation and firm performance (Barber, Ghiselli, & Deale, 2006; Dalbor et al, 2010; Madanoglu & Karadag, 2006; Madanoglu, Lee, & Castrogiovanni, 2011; Ozdemir, Kizildag, & Upneja, 2013).…”

“…Several studies have investigated the determinants of CEO cash compensation in the restaurant and casino firms (Dalbor, Oak, & Rowe, 2010; Gu & Choi, 2004; Guillet, Kucukusta, & Xiao, 2011; Kim & Gu, 2005). Other studies have focused on assessing the relationship between CEO compensation and firm performance (Barber, Ghiselli, & Deale, 2006; Dalbor et al, 2010; Madanoglu & Karadag, 2006; Madanoglu, Lee, & Castrogiovanni, 2011; Ozdemir, Kizildag, & Upneja, 2013). However, many scholars criticized that this pay-to-performance relationship is complex and ambiguous because performance is affected by various other factors (Tosi, Werner, Katz, & Gomez-Mejia, 2000; Yermack, 1997).…”

Is board of director compensation excessive in restaurant firms?

“…To the best of our knowledge, no hospitality study has yet focused on the excessiveness or appropriateness of overall BOD compensation and its impact on firm performance. The literature on the restaurant industry has not yet outpaced the mainstream and has also focused on the link between CEO compensation and firm performance (e.g., Dalbor, Oak, & Rowe, 2010;Guillet, Kucukusta, & Xiao, 2012;Ozdemir & Upneja, 2012;Seo & Sharma, 2013). This study aims to fill these research gaps and provide answers to the above questions.…”