Abstract
AbstractComplementing the existing partisanship and income distribution literature that focuses on the earnings of all employees, this paper examines the effect of left government partisanship on top managers. Drawing on firm-level top executive compensation data across thirteen advanced industrialized countries, the paper shows that left government partisanship principally leads to lower CEO compensation, either through laws that enhance workers’ collective bargaining power vis-à-vis management or laws that allow shareholders to cast proxy votes on executive compensation (i.e., say-on-pay laws). Furthermore, I show that left government partisanship reduces CEO pay more heavily in those firms that more strongly favor labor’s competing stakeholders. In particular, left partisanship reduces executive compensation more heavily in firms that set aside more revenue for shareholders, managers, or creditors, that is, firms with higher asset return, stock return, or debt. These findings highlight how the macro-politics of rising top income inequality at the national level interacts with the micro-distributive conflicts at the firm level. In particular, financialization, such as the rise of the shareholder value revolution, may accentuate the impact of partisan politics against top income inequality.
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