The Role of Defined Benefit Pension Plans in Executive Compensation
Brian D. Cadman
University of Utah - David Eccles School of Business
August 1, 2011
Although defined benefit pension plans constitute a significant portion of both annual compensation and firm-related wealth for many CEOs, prior studies of CEO compensation contracts often exclude these plans. Taking advantage of recently increased disclosure requirements, we analyze the role of defined benefit pension plans in these contracts. We find that firms with CEO defined benefit pension plans grant annual compensation that is larger than predicted by economic determinants, suggesting that CEO pension benefits are in addition to other forms of compensation. We also find that more powerful CEOs receive higher total pay and that the annual pension benefit is not sensitive to firm performance. Overall our results suggest that CEO DB pension plans serve as low-risk complements to more risky forms of CEO compensation.
Number of Pages in PDF File: 50
Keywords: Executive Compensation, Defined Benefit Pension Plans, Pay-Performance Sensitivity, CEO Power, Proxy Disclosure
JEL Classification: G31, G32, G34working papers series
Date posted: March 14, 2011 ; Last revised: August 11, 2011
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