Abstract

http://ssrn.com/abstract=1362047
 
 

References (52)



 
 

Citations (9)



 


 



Peer Choice in CEO Compensation


Ana M. Albuquerque


Boston University - School of Management

Gus De Franco


University of Toronto - Rotman School of Management

Rodrigo S. Verdi


Massachusetts Institute of Technology (MIT)

August 27, 2012


Abstract:     
Current research shows that firms are more likely to benchmark against peers that pay their Chief Executive Officers (CEOs) higher compensation, reflecting self-serving behavior. We propose an alternative explanation: the choice of highly paid peers represents a reward for unobserved CEO talent. We test this hypothesis by decomposing the effect of peer selection into talent and self-serving components. Consistent with our prediction, we find that the association between a firm’s selection of highly paid peers and CEO pay mostly represents compensation for CEO talent.

Number of Pages in PDF File: 53

Keywords: executive compensation, benchmarking, peer groups

JEL Classification: G34, J31, J33

working papers series





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Date posted: March 22, 2009 ; Last revised: September 14, 2012

Suggested Citation

Albuquerque, Ana M. and De Franco, Gus and Verdi, Rodrigo S., Peer Choice in CEO Compensation (August 27, 2012). Available at SSRN: http://ssrn.com/abstract=1362047 or http://dx.doi.org/10.2139/ssrn.1362047

Contact Information

Ana M. Albuquerque (Contact Author)
Boston University - School of Management ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-358-4185 (Phone)
617-353-6667 (Fax)
Gus De Franco
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
Rodrigo S. Verdi
Massachusetts Institute of Technology (MIT) ( email )
Sloan School of Management
100 Main Street E62-679
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)
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