Serial CEO Incentives and the Structure of Managerial Contracts
Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
February 25, 2011
Journal of Financial Intermediation, Forthcoming
I explore CEOs' incentives to select firm strategies and to acquire firm-specific skills when CEOs have job-hopping opportunities. Several features of managerial compensation, such as benchmarking of pay to larger and more prestigious companies, payments unrelated to past performance, unrestricted stock awards for highly paid CEOs, long-term incentives, and higher pay in companies granting long-term incentives, emerge in the optimal contract. I argue that the model can explain the change in the structure and the surge in U.S. CEO compensation as well as differences across countries and across firms within a country.
Accepted Paper Series
Date posted: February 28, 2011
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