Factors Effecting CEO Compensation: Evidence from Listed Banks in Pakistan

This paper represents the initiative to highlight a developing country’s perspective on justification and thereby identifying the factors affecting CEO compensation. Pakistan’s Banking Sector represents a definite case of very high salaries and compensation packages, especially for the top level staff such as CEO and the directors. This paper tends to explore the reason for such high compensation for CEO’s in the Banking Industry. This paper attempts to use panel data of 22 listed banks in Pakistan for the period 2006-2013 and explores the relationship between CEO compensation and following variables: Firm Performance, Firm Size, CEO from the family, Independence of the board of directors, Shares held by the board, percentage ownership of financial and non-financial institution. The result reveals that Performance does not play any significant role in determining CEO compensation, whereas size of the firm has a significant and positive impact on CEO compensation in the banking sector of Pakistan. On the other hand within Ownership Structure board size does not matter, however, the composition of the board i.e. percentage of shares held by institutions and proportion of independent directors on the board, are the main factor affecting the CEO compensation

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