Mendoza School of Business

Do Conservative Or Liberal Leaning Companies Pay More?

Published: September 13, 2016 / Author: Forbes


Adam Wowak

The authors [Mendoza professor Adam Wowak and coauthor  Abhinav Gupta] used donation data to rank the boards of Standard & Poor 1500 companies along a liberal-conservative axis, before then comparing this with the annual pay for the CEO of those companies over a 15 year period from 1998 to 2013.

The researchers hypothesized that directors would differ in their views on executive pay depending on their political leaning, which would manifest itself both in the amount of money paid to the CEO and on whether the boss should be rewarded (or not) for the performance of their company.

“Our main idea was that conservative- and liberal-leaning boards will differ in the importance they place in the CEO position, as prior research has shown that conservatives are, by and large, more likely to attribute outcomes to person-based factors as opposed to situational factors. To the extent that conservative boards perceive that CEOs are more important to firm success, they should pay them more,” they say.

This was confirmed by the data, which revealed that conservative leaning boards did indeed pay their CEOs higher salaries than liberal leaning boards, in large part because of the importance they placed in the CEO role.

Read the entire article on the Forbes website.