The influence of foreignness on CEO pay

Abstract

Purpose: This study aims to explore the relationship between foreignness and CEO pay. Design/methodology/approach: This study combines cross-sectional and time series observations analyzed with panel data methodology in a sample of 59 firms listed in the Spanish IBEX-35 index between 2006 and 2020. Findings: International ownership influences CEO underpayment and foreign sales influence CEO overpayment. Practical implications: CEO pay is susceptible to being influenced by foreign non-American variables. An appropriate understanding of these factors can contribute to discussing policies that balance the level of CEO payment in large public firms. Originality/value: Research on internationalization and CEO pay is scarce. A handful of studies confirm the link between Americanization and executive compensation in Europe. However, the authors still do not know if the level of CEO pay is influenced by non-American exposure. To do this, the authors test the effect of firm – ownership, sales, board – and individual – CEO – exposure to international, non-US environments on the level of over/underpayment of CEOs in a sample of Spanish firms.