Determinants of executive salary in a competitive market

Abstract

This study explored the impact of social networks on compensation level of managers as well CEOs. Our arguments are based on Vroom expectancy theory and Adam's equity theory. Social network with key personalities (political leaders, actors, cricketers etc.) adds to the prestige and power of the CEOs. Based on segmented labor market (SLM) theory, authors argue that wage differentials across the industries exist due to labor immobility. The paper explored factors contributing to labor immobility which include institutional factors (managerial rule, government and laws, etc.), union membership, and skill level. Inflow of migrant labor influences the wage rate across the industries.