Abstract
Managerial power hypothesis has explained the relation between CEO Power and executives’ compensation (or the employees’ compensation) from the aspect of private benefits. But there were no studies that examined CEO power and workers’ pay in China. Analyzing a sample of A share listed state-owned enterprises from 2007 to 2010, we examine the relation between CEO power and employees’ compensation in Chinese state-owned enterprises and the reason of this relation. We find that powerful CEOs pay workers less in state-owned enterprises, and one of the explanations is that CEOs with more power prefer to recruit more employees which lead to excess employment and less average workers’ pay. Additional tests indicate that the power of workers, staff supervisors, management ownership, and outside restriction do not mitigate such behavior but inflate it instead. Our study helps explain the different relation between CEO power and employees’ compensation in China from the aspect of excess employment, which may contribute to the managerial power hypothesis.
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