Work detail

Executive Compensation in Firms Producing Addictive Goods

Author: Mgr. Michael Janský
Year: 2015 - winter
Leaders: Jiří Novák M.Sc., Ph.D., Deloitte Corporate Chair
Work type: Finance, Financial Markets and Banking
Language: English
Pages: 76
Awards and prizes:
Abstract: This thesis investigates executive compensation, turnover and migration patterns in firms that
produce addictive goods (tobacco, alcohol, and gambling). Previous research has identified
costs associated with the production of harmful goods specific to these industries. Consistent
with this stream of research, I find increased executive compensation in tobacco, alcohol, and
gambling firms. This finding seems to be driven by industry specific characteristics, rather than
by executives’ traits or by the ‘traditional’ determinants of executive compensation. Executive
migration patterns and the effect of job change on compensation indicate that the higher
compensation is not caused by executives’ attributes well suited for these firms’ specific needs,
by executives’ contribution to value-creating activities, or by other executive-specific
characteristics. Rather, the higher compensation seems to reflect a payment to executives for
having to bear society’s aversion to or displeasure with these harmful goods, and those who
produce them.




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