Control and Compensation in Financial Institutions

I investigate the influence of ownership structure on the compensation received by the top executive in a sample of U.S. commercial banks. In institutions where the institutions' trust department controls a proportion of the institution's shares, managerial pay-performance sensitivities are lower, and base cash compensation is higher. At conventional ownership levels, compensation levels increase with the proportion of the institution's equity held by the trust department. Compensation differentials between top managers are not as pronounced in institutions with fiduciary ownership. CEOs of institutions with external block owners receive the largest compensation packages that are sensitive to performance and incentive structures