EXECUTIVE COMPENSATION, SIZE, PROFIT, AND COST IN THE ELECTRIC UTILITY INDUSTRY

Factors influencing the compensation of electric utility executives are analyzed theoretically and empirically. A major conclusion of the study is that firm size (which is better measured by revenues, rather than KWH) explains over 80% of the variation in compensation. The growth rate, profit rate, and cost level of the firm have little or no relationship with compensation. Subsidiary and gas dummy variables were found to be statistically significant, as was the size of the city where the firm is located. Regulatory climate and region also proved to be insignificant. Cost of living differences were not found to have a significant influence on compensation, perhaps due to the relative immobility of electric utility executives, or deficiencies in the cost of living index.