A Try To Apply The Chief Executive Officer Compensation : Theories In The Algerian Context
Résumé: This study aims first to investigate the determinant factors affecting the CEO compensation. Second, it aims to test two important opposing theories of management compensation, agency theory and managerial power theory, in order to investigate whether CEOs in Algerian corporations are compensated according to their power or to their performance. To achieve the above objectives, data of a sample of 30 Algerian corporations during the period 2015-2016 are used. Pooled Data Analysis is used to explore the determinant factors of CEO compensation, while simultaneous equation model is used to test agency theory and PC Analysis is used to test managerial power theory. Findings reveal that CEO compensation is positively affected by CEO age, duality and firm performance; where older CEOs,or those who belong to the BOD,orthose whowork in high performing companies are more compensated than other CEOs. Findings also show that CEO compensation is negatively affected by CEO nationality, ownership, property rights and board size; where Algerian Owner CEOs that work in public companies with large BODtend to be less compensated than other CEOs. However, company size and CEO tenure seem to have no significant effect on CEO compensation. Findings also reveal that CEO compensation and firm performance are not jointly determined. Thus, CEOs in Algerian companies are not compensated according to their performance. Accordingly, CEO compensation does not follow the agency theory. However, results show that CEOs compensation is positively affected by their prestigeand status power in the company. Therefore CEOs in Algerian corporations are compensated according to their power rather than to their performance. Thus, CEO compensation in Algeria follows managerial power theory. Algerian Corporations should establish efficient promotion and compensation systems, where the CEO's remuneration should include a variable part that varies with performance. In addition, they should establish an effective monitoring system especially in large corporations to limit the deviant activities of managers
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