The Incentives of Compensation Consultants and CEO Pay
Brian D. Cadman
University of Utah - David Eccles School of Business
Mary Ellen Carter
Boston College - Department of Accounting
Stephen A. Hillegeist
Arizona State University (ASU) - W. P. Carey School of Business, School of Accountancy
February 1, 2009
Journal of Accounting and Economics, Forthcoming
We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients (Waxman, 2007). Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.
Number of Pages in PDF File: 43
Keywords: Executive Compensation, Compensation Consultants
JEL Classification: J33, G34
Date posted: March 13, 2008 ; Last revised: July 8, 2009
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