An examination of CEO compensation of US banks and thrifts using non-traditional performance measures: 1997–2001

Abstract

This study compares the compensation of chief executive officers (CEOs) of banks and thrifts in the United States, during the 1997–2001 period. The authors examine the effect of traditional industry measures (such as the value of long-term incentive plans) and non-traditional measures (such as the ploughback ratio), on CEO compensation. The results of Exploratory Factor Analysis indicate that many of these measures are highly correlated and are likely to lead to serious problems of multicollinearity in multiple regression models of compensation. The authors find a crude difference (univariate) in compensation between CEOs from both types of institution. Using a multiple regression model, however, it is found that this discrepancy can be attributed to differences in traditional and non-traditional measures of performance between the two types of institutions. The results add to existing literature of bank CEO compensation by examining non-traditional measures of performance.