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Does the Market for CEO Talent Explain Controversial CEO Pay Practices?Martijn CremersUniversity of Notre Dame Yaniv GrinsteinCornell University - Samuel Curtis Johnson Graduate School of Management May 21, 2013 Review of Finance, Forthcoming Abstract: Benchmarking, pay for luck, and the large compensation packages given to CEOs in recent years are three major controversial compensation practices. We examine the extent to which variation in the market for CEO talent explains these practices. We find that CEO compensation is benchmarked against other firms only in industries where CEO talent is not firm-specific, and that pay for luck is more prevalent there also. These findings are consistent with theories based on the market for CEO talent. However, CEO compensation levels do not depend on whether CEO talent is firm-specific, which seems inconsistent with the talent competition argument.
Number of Pages in PDF File: 55 Keywords: CEO Compensation, talent, Skills, CEO Turnover, talent pools, pay for luck JEL Classification: J33, G34 Accepted Paper SeriesDate posted: March 26, 2008 ; Last revised: May 21, 2013Suggested CitationContact Information
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