CEO compensation: evidence from the field
Journal
Journal of Financial Economics
Subject
Finance
Publishing details
Authors / Editors
Edmans A;Gosling T;Jenter D
Biographies
Publication Year
2023
Abstract
We survey directors and investors on the objectives, constraints, and determinants of CEO pay. We find that directors face constraints beyond participation and incentives, and that pay matters not to finance consumption but to address CEOs’ fairness concerns. 67% of directors would sacrifice shareholder value to avoid controversy, leading to lower levels and one-size-fits-all structures. Shareholders are the main source of constraints, suggesting directors and investors disagree on how to maximize value. Intrinsic motivation and reputation are seen as stronger motivators than incentive pay. Even with strong portfolio incentives, flow pay responds to performance to fairly recognize the CEO’s contribution.
Keywords
Executive compensation; Contract theory; CEO incentives; Fairness; Survey
Available on ECCH
No
