Managerial compensation when managers are principals

Prior research has used the principal-agent framework to examine managerial compensation. However, in a number of corporations, managers own enough of their firms' voting rights to be able to decide with relative impunity how they will be compensated. In a real sense, they are the principals. Using a sample of the largest U.S. corporations, I examine the compensation of such CEOs to see if they are paid more than other CEOs. My overall results provide no support that such CEOs are paid more in cash compensation as well as all forms of direct compensation. The only exception is in some smaller firms, where CEOs are paid more in total compensation when management controls enough of the company's stock. However, such firms constitute a tiny fraction of the sample firms. For dual-class firms and firms where CEOs control enough of the company's stock, I find no evidence that such CEOs are paid more.