| The purpose of this study was to examine the relationship between CEO compensation variables, organizational performance variables, and organizational size variables using a nonexperimental design to test for a linkage between CEO compensation and organizational performance. A random stratified sample of 32 low-ranked, 32 medium-ranked, and 32 high-ranked organizations, for a total of 96 organizations, was selected from the Fortune 500 list of the largest companies in the United States for the years 1999, 2000, and 2001. CEO compensation variables were measured by base and bonus pay. Organizational performance variables were measured by total return to investor, return on stockholders' equity, and earnings per share. Organizational size was measured by revenues and sales growth. This study utilized the Fortune 500 magazine's annual report for the years of 1999, 2000, and 2001, that was found in the April issues of 2000, 2001, and 2002, as the data sources for firm performance. Information regarding the CEOs' compensation agreements for those years were downloaded from the SEC EDGAR website (2003).; It was hypothesized that there would be positive linear relationships between (a) organizational rank and CEO base compensation, (b) organizational rank and CEO cash bonus compensation, (c) organizational size and CEO base compensation, and (d) organizational size and CEO bonus compensation. While there was some evidence to suggest that recognizable correlations existed, the analyses failed to support the four hypotheses. An alternative answer of why the results failed to support these hypotheses was that the CEO performance agreements made by the individual firms may have used different indicators of performance.; Implications for use in organizational development were discussed. Recommendations for future study included CEO performance agreements and their relationship to organizational performance variables. |
