EXECUTIVE-COMPENSATION IN THE LIFE-INSURANCE INDUSTRY

Alternative theories imply differential compensation levels between executives of mutual and stock insurance companies. Evidence from the life insurance industry indicates (1) the compensation of mutual executives is lower than that of stock executives, (2) the compensation of mutual-subsidiary executives is lower than that of stock-subsidary executives, and (3) the compensation of mutual executives is less responsive to firm performance than that of stock executives. This evidence is consistent with the existence of differences in corporate investment opportunity sets and resulting differences in required managerial discretion between mutual and stock life insurance companies.