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What are the odds that the U.S. economy will head into a recession in 2008?March 18, 2008 Founders Make Less MoneyDo founders matter in newly public firms? A study, written by Lerong He and published in the Journal of Business Venturing, examined executive compensation, governance structure, and firm performance and found that founder CEOs tend to earn less incentive compensation and less total compensation than professional CEOs.
Even though their salaries are less, founder-managed firms are associated with higher financial performance and are more likely to survive than professionally managed firms. Firms with founder-CEOs are associated with even higher financial performance when the positions of CEO and chairperson is combined.
The study applied a series of decomposition methods to separate founders' extrinsic characteristics from their intrinsic endowments.
The study detailed founder-CEOs' compensation patterns. Two compensation variables were examined: incentive compensation measuring CEOs' variable compensation composition, which is used to indicate the link between CEO compensation and firm performance; and total compensation measuring overall pay level, which is applied to specify costs of hiring a CEO.
Tags: public companies (1) journal of business venturing (1) leorng he (1) corporate governance (203) director news (100) compensation (121)
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           Related ContentShareholder News ArticlesBoardroom Shakeup at HSBCCompanies Err On Director Pay Reports EA's Bid for Take-Two Goes Hostile Directors Get Smaller Raises Boards Hit the $1 Million Mark The Directorship InstituteThe Directorship Institute, held on December 2, 2008, brings together the most well respected voices in corporate governance. For more information click here or call 617.399.3043.
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