Title: The CEO – 'star athlete' analogy: the role of variable compensation in professional sport

Authors: Alan Kaplan, Norman J. O'Reilly

Addresses: Ted Rogers School of Business Management, Ryerson University, 350 Victoria St., Toronto, ON M5B 2K3, Canada. ' School of Sports Administration, Faculty of Management, Laurentian University, 935 Ramsey Lake Rd., Sudbury, ON P3E 2C1, Canada

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.

Keywords: sport finance; variable compensation; baseball; professional sport; team sports; senior management compensation; shirking; CEOs; fixed salaries; stock options; athletes salaries; senior management salaries.

DOI: 10.1504/IJSMM.2008.017212

International Journal of Sport Management and Marketing, 2008 Vol.3 No.4, pp.358 - 373

Available online: 19 Feb 2008 *

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