Compensation, Turnover, and Top Management Incentives: Historical Evidence

J. OF BUSINESS, Vol. 70 No. 2, April 1997

Posted: 17 Mar 1997

See all articles by Charles J. Hadlock

Charles J. Hadlock

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Gerald B. Lumer

United States Department of Justice

Abstract

We find that the rate of top management turnover and the sensitivity of turnover to stock returns for a sample of large industrial firms from 1933 to 1941 was significantly smaller than estimates reported for modern panels. We present evidence that management compensation has become more sensitive to firm performance since the 1930s. In contrast to the conclusions of Jensen and Murphy (1990) and others, our findings indicate that management incentives under control of the board have become stronger rather than weaker over the past half century. These findings are consistent with internal and external control mechanisms functioning as complements.

JEL Classification: D21, L22, G30

Suggested Citation

Hadlock, Charles J. and Lumer, Gerald B., Compensation, Turnover, and Top Management Incentives: Historical Evidence. J. OF BUSINESS, Vol. 70 No. 2, April 1997, Available at SSRN: https://ssrn.com/abstract=8188

Charles J. Hadlock (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

315 Eppley Center
East Lansing, MI 48824-1121
United States
517-353-9330 (Phone)
517-432-1080 (Fax)

Gerald B. Lumer

United States Department of Justice

950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
United States

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