Abstract
The objective of this study is to compare the executive compensation of two industries that are diametrically opposites in terms of dependence on government: The Aerospace/Defense industry versus Leisure/Hospitality industry. The financial crisis brought the issue of the executive compensation to the attention of government. Congress has often tried to control executive compensation through mandated public disclosures of private contracts, restrictive tax policy, and direct interference with corporate governance. Recent studies show a reduction in donations to nonprofits subsequent to disclosure of high executive compensation. In the same light, since governments are the primary customers of defense industry, we suspect that the issue of high levels of executive compensation will factor into contract negotiations. The study finds a negative relationship, albeit weak, between the Aerospace/Defense industry variable and executive compensation as compared to the Leisure/Hospitality industry.
Highlights
There is extensive literature on the executive compensation focusing on the factors that explain the variation in its level across firms
Since congress is so antiexecutive compensation, the question becomes, do they control or affect the compensation of firms that are heavily dependent on government, Aerospace and Defense Industry? The objective of this study is to compare the executive compensation of two industries that are diametrically opposites in terms of dependence on government: the Aerospace/Defense industry versus Leisure/Hospitality industry
Since governments are the primary customers of defense industry, we suspect that the issue of high levels of executive compensation will factor into contract negotiations
Summary
There is extensive literature on the executive compensation focusing on the factors that explain the variation in its level across firms. Congress has often tried to control executive compensation through “mandated public disclosures of private contracts, restrictive tax policy, and direct interference with corporate governance” (Willard, 2010). Since congress is so antiexecutive compensation, the question becomes, do they control or affect the compensation of firms that are heavily dependent on government, Aerospace and Defense Industry? The objective of this study is to compare the executive compensation of two industries that are diametrically opposites in terms of dependence on government: the Aerospace/Defense industry versus Leisure/Hospitality industry. Since governments are the primary customers of defense industry, we suspect that the issue of high levels of executive compensation will factor into contract negotiations
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