What Do Unions Do to Executive Compensation?

We estimate the relation between union presence and executive compensation using a unique panel of executives in publicly listed US firms during the period 1992-2001. We find evidence that union presence is associated with lower levels of total executive compensation. We find this union effect to be primarily the result of substantially lower stock option awards, and to a lesser extent due to lower cash pay. Moreover, the negative relation between unionization and executive remuneration becomes larger at the higher end of the conditional distribution of executive remuneration. We also find that the elasticity of cash pay to financial performance is similar across unionized and non-unionized firms, and that union presence is associated with a more compressed intra-firm and inter-firm executive compensation structure. JEL Classifications: G30, J33, J51, M52