Unionized employees’ influence on executive compensation: Evidence from Korea

Abstract

This article explores the relationship between executive compensation and employee voice using a panel dataset from Korean firms. It was found that the existence and rate of labour unionization are both negatively associated with executive compensation payment, and that the negative association is progressively stronger for upper percentile executive pay. Labour union existence also has a strong negative correlation with stock option use in executive compensation packages, but unionization rate does not, implying that union existence is more critical in shaping executive compensation structures than the strength of the union. Membership of large family-owned business conglomerates (chaebol), high financial risk and high employee wages are identified as channels that reinforce the negative influence of labour unions on executive compensation.