초록/요약

This study analyzed the relationship between CEO compensation and performance of public institutions in Korea, and conducted panel analysis on samples of 10-year surveys of public and quasi-governmental institutions from 2007 to 2016. This study primarily seeks to verify the performance-compensation relationship and asymmetry of the performance-compensation of CEOs (later, the head of the agency) of public institutions in Korea through empirical data. Specifically, based on data from the heads of domestic public institutions, the performance-compensation sensitivity is verified to what extent the heads of institutions are sensitive to institutional performance. Performance-compensation sensitivity is the extent to which changes in individual performance affect changes in rewards, and the value of the coefficients estimated from the sample data indicates changes in the CEO’s wealth when $ 1 changes, resulting in greater incentives for managers and control. Furthermore, this study explores the possibility of asymmetry in the sensitivity of performance-compensation when the level of compensation for heads of public institutions improves or worsens the agency’s performance. Specifically, asymmetry in performance-compensation sensitivity is a comparison of the extent of changes (increases) in compensation for agency directors when performance improves this year, which can be a case of several public institutions that receive high incentives despite poor management performance. A total of 1,088 institutional-year cases were selected as the study sample collecting data based on a total of 109 institutions disclosed as of 2016. The results show that pay-performance sensitivity is asymmetric with organizational performance. In other words, CEO compensation in public institutions showed significant downward rigidity and the increase in the compensation of the head of the agency when the performance was improved was significant compared to the decrease in the performance. In particular, the downward rigidity was noticeable in the asset management evaluation score and the total asset net return rate (ROA) among the various performance variables used in the analysis. In particular, the downward rigidity was particularly pronounced when we consider management evaluation score of the public institution as a dependent variable. Moverover, the analysis of political connections among managerial characteristics that may affect management compensation and performance shows that asymmetry in management evaluation scores is strengthened when the heads of public institutions are politically connected to the current government. These results suggest that the agency’s performance-based pay does not achieve the intended motivational effect, and particularly, the degree of political connectivity of public agency heads is likely to worsen the agency’s agent problem and cause institutional costs to rise.