Determinants of CIO Compensation Structure and Its Impact on Firm Performance

Although chief information officers (CIOs) are becoming increasingly critical in corporate governance and strategies, empirical studies focusing on CIOs and their impact on corporate performance are far and few in-between. In this paper we investigate the role of CIOs based on governance theory, agency theory and IT-business alignment framework using data collected from various financial databases. We first examine the determinants of CIO compensation structure and level. Then, we use CIO and top management team (TMT) compensation structure as a proxy to IT-business alignment and investigate its effect on firm performance. Our results provide empirical support for the hypothesized IT attention deficit of the board of directors in the literature. Moreover, we found that the CIO-TMT compensation alignment is indeed related to firm performance, and that its effect is moderated by the competitiveness of the market, the capital expenditure, and the market share of the firm.