Towards a Normative CEO Compensation: Mathematical Benchmarking. رسالة دكتوراة

Abstract

This research uses solid geometry to develop a helpful and effective mathematical model for quantifying CEO efficiency. The model suggests an index that captures three main dimensions—firm performance, firm size, and CEO compensation—within a three dimensional space. This allows for the explanation of how executive compensation is linked to business success and the company's size. The model is based on employing advanced mathematics to serve the "informativeness" principle and enabling more accurate comparisons of CEOs within the same business line. The process helps develop more equitable compensation programs by linking pay directly to actual performance and firm size rather than to murky or subjective benchmarks. The study also empirically tests the model by applying it to the listed companies in the Dow Jones Index from 2019 to 2023. This real-world test assesses the extent to which the model accurately predicts outcomes and whether it functions effectively outside of theoretical frameworks. The results demonstrate that the model successfully identifies variations in CEO efficiency and provides valuable insights into structuring executive pay. Based on these findings, the study recommends expanding the model's application to companies in other industries and markets beyond those in the Dow Jones. This could empower policymakers to enhance their practices in establishing fair executive compensation. Finally, the study encourages other researchers and financial practitioners to investigate how solid geometry can serve as an effective tool for addressing complex financial and measurement challenges, especially where rigorous, multidimensional analysis is necessary