Peer choice in CEO compensation

Peer choice in CEO compensation

Current research shows that firms are more likely to benchmark against peers that pay their Chief Executive Officers (CEOs) higher compensation, reflecting self serving behavior. We propose an alternative explanation: the choice of highly paid peers represents a reward for unobserved CEO talent. We...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Journal of financial economics 2013-04, Vol.108 (1), p.160-181
Hauptverfasser: Albuquerque, Ana M., De Franco, Gus, Verdi, Rodrigo S.
Format: Artikel
Sprache:eng
Schlagworte:
Benchmarking
Chief executive officers
Compensation
Decision analysis
Executive compensation
Forecasts
Organizational behavior
Organizational behaviour
Peer groups
Peers
Personnel management
Studies
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:Current research shows that firms are more likely to benchmark against peers that pay their Chief Executive Officers (CEOs) higher compensation, reflecting self serving behavior. We propose an alternative explanation: the choice of highly paid peers represents a reward for unobserved CEO talent. We test this hypothesis by decomposing the effect of peer selection into talent and self serving components. Consistent with our prediction, we find that the association between a firm's selection of highly paid peers and CEO pay mostly represents compensation for CEO talent.
ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2012.10.002