The CEO – 'star athlete' analogy: the role of variable compensation in professional sport Online publication date: Tue, 19-Feb-2008
by Alan Kaplan, Norman J. O'Reilly
International Journal of Sport Management and Marketing (IJSMM), Vol. 3, No. 4, 2008
Abstract: We argue that CEOs and senior management, the 'stars' of the business world, are comparable to star professional athletes in terms of the impact that they have on their respective organisations and the conflicts of interest that they face in performing their functions. An empirical analysis of two distinct databases of athlete and senior management salaries finds that while both groups are paid similarly in terms of amount, CEOs and senior management are paid principally with stock options and other forms of variable compensation, while star professional athletes are paid almost exclusively with a fixed salary. This analysis reveals that these differences are highly significant. We explore why there is a difference in the form of compensation paid to these two groups and whether there should be. We conclude by arguing that the form of compensation used in professional team sports may not be allocatively efficient.
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