This study examines the impact of CEO equity-based compensation (EBC) on employee agency conflicts, contributing to income inequality even within corporations. proxy for employee wages, we conduct multivariate analysis (OLS models) and find that CEOs with higher EBC tend to pay their employees lower wages. We also examine the impact of EBC on average employee wages in different industries and find that such an impact is more evident in non-technology firms than in technology firms. Finally, we find that CEOs with higher PPS are more likely to depress employee wages when the business cycle shows a downturn. While the literature on CEO compensation suggests that EBC can mitigate agency conflicts between managers and shareholders, we suggest that high levels of EBC can create another aspect of the agency conflicts, contributing to income inequality even within corporations.​

Key words: Equity-Based Compensation, Pay-Performance Sensitivity, Average Employee Wages, Business Cycle, Income Inequality

JEL codes: G30, J31, J33