This study investigates the relation between the use of explicit employment agreements (EA) and CEO compensation. Overall, our findings are broadly consistent with the predictions of Klein, Crawford, and Alchian (1978) that an EA is used to induce CEOs to make firm-specific human capital...

This paper examines why powerful CEOs are paid more in total compensation. Broadly, our results are consistent with the managerial ability view. First, CEO power is endogenously determined reflecting the CEO's ability. Specifically, founder-CEOs are more powerful than professional- and heir-CEOs...