What Do We Know About Executive Compensation at Small Privately Held Firms?

Abstract

We examine executive compensation using data from two nationally representative samples of small privately held U.S. corporations conducted ten years apart — in 1993 and 2003. We find that executive pay at small privately held firms increases with firm size and varies widely by industry, consistent with stylized facts about executive pay at public companies. From 1993-2003, inflation-adjusted executive pay declined at small privately held companies, in contrast with the run-up in executive pay at large public companies over the same period. Executive pay is higher at more complex organizations; is inversely related to CEO ownership and financial risk; and is related to CEO age, education and gender.

Keywords: CEO; Compensation; Executive Pay; Organizational Form; SSBF

JEL Classification: H24, H25, G32, J33, M13, M52