Public Opinion and Executive Compensation
Camelia M. Kuhnen
UNC Kenan-Flagler Business School; Northwestern University - Kellogg School of Management
University of Mannheim - Department of Finance
June 1, 2010
Management Science, Forthcoming
We investigate whether public opinion influences the level and structure of executive compensation. During 1992-2008 the negativity of press coverage of CEO pay varied significantly, with stock options being the most criticized pay component. We find that after more negative press coverage of CEO pay firms reduce option grants and increase less contentious types of pay such as salary, while overall compensation does not change. The reduction in option pay after increased press negativity is more pronounced when firms, CEOs and boards have stronger reputation concerns. Our within-firm, within-year identification shows the results cannot be explained by annual changes in accounting rules regarding executive compensation, stock market conditions, or pay mean-reversion.
Number of Pages in PDF File: 33
Keywords: executive compensation, public opinion, media coverage
JEL Classification: G34, M52, J33Accepted Paper Series
Date posted: May 20, 2010 ; Last revised: November 4, 2011
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