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CEO compensation: evidence from the field

Edmans, Alex, Gosling, Tom and Jenter, Dirk ORCID: 0000-0003-4168-9329 (2023) CEO compensation: evidence from the field. Journal of Financial Economics, 150 (3). ISSN 0304-405X

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Identification Number: 10.1016/j.jfineco.2023.103718

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.

Item Type: Article
Additional Information: © 2023 The Author(s)
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M12 - Personnel Management
M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues)
Date Deposited: 26 Oct 2023 13:24
Last Modified: 15 Jul 2024 03:48
URI: http://eprints.lse.ac.uk/id/eprint/120546

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