The Effect of Social Pressures on CEO Compensation
James S. Ang
Florida State University
Gregory Leo Nagel
Middle Tennessee State University
Indiana University - Kelley School of Business - Department of Finance
May 15, 2014
We find that social pressures have a positive effect on CEO compensation. Social pressures come from frequent interactions with other CEOs and wealthy people (Forbes 400 people and social elites) in the local area; from attending industry, alumni, and charitable events; and from displaying and comparing wealth through luxury homes. Pay premiums associated with social pressures (social premiums) persist after incorporating other determinants of pay: local economic conditions, firm characteristics and performance, and corporate governance. Our results are robust to adding state fixed effects and firm fixed effects. Social premiums are more important for those who are most likely to value social recognition: young CEOs and CEOs who did not graduate from an Ivy League school.
Number of Pages in PDF File: 44
Keywords: Corporate governance; CEO compensation; social interactions; comparison groups; social pressures
JEL Classification: G3, J31, J33working papers series
Date posted: March 25, 2008 ; Last revised: May 20, 2014
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