Date of Award

Spring 5-20-2022

Author's School

Olin Business School

Author's Program

Business Administration

Degree Name

Bachelor of Arts (A.B.)




Throughout the COVID-19 pandemic, executive compensation arose at a rapid scale — with many in the labor force displaced or facing unemployment, many questioned how the excessive compensation packages of Chief Executive Officers (CEOs) reflected in actual firm performance. However, executive compensation has been a mainstay topic in academic literature. Researchers have attempted to unearth the exponentially growing paychecks or the link between compensation and other firm factors (market performance, employee satisfaction, CEO perception, etc.).

This study aims to examine the relationship between S&P 500 CEO compensation and the innovation levels of their firms; through this, we hope to understand the factors driving innovation in a firm and if increased compensation links to sales-oriented research and development. Data was obtained for companies listed on the S&P 500, detailing research quotient, total executive compensation, salary, bonus, restricted stock, and stock options from 2000 to 2020. Year-on-year data was then pooled to provide a detailed picture and measure the impact of these compensation-based variables against the research quotient — defined as a firm's ability to generate revenue growth from R&D investments.

In response to our hypothesis, our data showed significance at the 90% level regarding the impact of total executive compensation and stock options on a higher RQ value. Our regressions, however, did not show statistical significance of the effect of salary, bonus, and restricted stock on the research quotients. From 2010 to 2020, CEO compensation has increased by 59.6%; the proportion contributed by restricted stock of total compensation has increased by 90.6%, while the proportion of stock options to total compensation has decreased by 148.3%. Despite these differences, this research concludes that stock options are the only component of compensation that has a positive statistically significant impact on innovation productivity.

Additional Advisors

Dr. Radhakrishnan Gopalan

Included in

Business Commons