Abstract
This study examines the compensation structure in Korea focusing on business groups (chaebols) and family CEOs, where CEO compensation has been mandated to disclose as public information since 2013. We find that there is no significant difference in total CEO compensation level between chaebol and non-chaebol firms but chaebol firms provide compensation mix with larger salary and less bonus. While non-chaebol firms set performance-contingent CEO compensation, chaebol firms do not. Moreover, among the chaebol firms, family CEOs receive higher total compensation than non-family CEOs. The higher compensation package of family CEOs is driven by salary, while bonus level is similar to the non-family CEOs’. Despite the high total compensation of family CEOs, the firms with family CEOs are not larger, have lower investment opportunity, and show lower firm performance. It implies rent extraction through compensation by controlling families in Korean business groups.
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