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CEO compensation: evidence from the field

Journal

Journal of Financial Economics

Subject

Finance

Publishing details

Journal of Financial Economics 2023 In Press

Authors / Editors

Edmans A;Gosling T;Jenter D

Biographies

Alex Edmans

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


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