Executive Pay and 'Independent' Compensation Consultants
Kevin J. Murphy
University of Southern California - Marshall School of Business; University of Southern California - Department of Economics; USC Gould School of Law
Harvard Business School - Accounting and Control
November 22, 2009
Marshall School of Business Working Paper No. FBE 10-09
Journal of Accounting and Economics, Forthcoming
Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to “cross-sell” services and to secure “repeat business.” We find evidence in both the US and Canada that CEO pay is higher in companies where the consultant provides other services, and that pay is higher in Canadian firms when the fees paid to consultants for other services are large relative to the fees for executive-compensation services. Contrary to expectations, we find that pay is higher in US firms where the consultant works for the board rather than for management.
Number of Pages in PDF File: 41
Keywords: Executive Compensation, Compensation Consultants, Conflicts of Interest, CEO Pay, board of directors, director pay, corporate governance, disclosure
JEL Classification: J33, M52, M48, G38
Date posted: June 21, 2008 ; Last revised: February 24, 2010
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