Renira C. Angeles, who recently received her PhD in Political Science from Central European University (CEU), Hungary, has presented a paper co-authored with Achim Kemmerling, University of Erfurt, Germany, “How Redistributive Institutions Affect Pay Inequality and Heterogeneity among Top Managers,” at the Politics and Inequality conference held December 2018 in Warsaw, Poland.
Dr. Angeles applies quantitative research methods to understand the political causes and consequences of income inequality, especially at the high-end of the income ladder, as well as the consequences of parties’ economic policies. Renira C. Angeles recently published the article, “The Politics of Top Executive Compensation in Advanced Democracies,” in Sociology Compass. In 2018, Dr. Angeles led a project on technology, inequality and education in the Norwegian Board of Technology, providing policy advice to the Norwegian Parliament.
We asked Dr. Angeles for an extended abstract of their Politics and Inequality conference paper and, via email, some questions about their research.
The incredible rise of executive pay has received a lot of scholarly interest. Since the 1970s, generous bonus rewards for top executives have appeared more frequently. This trend has been more widespread in some democracies more than others. This paper asks, Why do some advanced democracies experience growth average CEO pay levels more so than others? We argue that a crucial problem in moderating these increases is the heterogeneity among top managers. In particular, inequality among top managers’ pay makes redistributive institutions, more so than other institutions, better suited to deal with rising pay. To empirically test our argument, we use a novel data set on executive pay across 17 OECD countries. We compare the effect of different institutional factors: corporate and personal income taxation, the unions’ bargaining power, and regulative attempts. We find that redistributive institutions of personal income tax and unions’ bargaining power is effective in moderating high labour wages, especially for very large firms as measured by their stock market value.
The research you presented at the Politics and Inequality conference was a co-authored paper (with Achim Kemmerling) on cross-national variation in the pay of top managers. How did you get interested in this topic? And how is this topic connected to other research that you are doing?
I’m interested in the multidimensionality of inequality and the different implications it has for democracies. I got interested in assessing CEO pay and inequality during my MA studies where I examined the politics of CEO pay in the largest Norwegian state-owned companies. Looking into CEO pay does not tell us the whole story on the politics of inequality, but it can tell us a good deal about the economic fortunes of the working poor. Although we have firm research in redistributive politics, and theories of institutions and income inequality, we need specific theories that can tell us why average CEO pay differs across industrialized economies.
Further, I was interested in looking across Europe where redistributive institutions and policies in general exist to a greater extent than, say, the US. This paper assesses the political causes of CEO pay, but that is just half of the story. My interest into this topic also evolved from the thought of the possible policy feedback that generous bonus schemes can generate.
In this paper, you use an original dataset. Please briefly describe these data and why they are well-suited for your research.
The data is collected from annual reports of firms. There are executive characteristics as well as industry and firm characteristics. It is well suited to my mission to assess redistributive institutions and policies because it is a record of the economic fortunes of top managers who – because money is a political resource – can also be significant political actors.