Abstract

http://ssrn.com/abstract=1912179
 
 

Citations (7)



 


 



Contractual Versus Actual Severance Pay Following CEO Turnover


Peggy Huang


Tulane University - Finance & Economics

Eitan Goldman


Indiana University - Department of Finance

August 18, 2011

Midwest Finance Association 2012 Annual Meetings Paper

Abstract:     
Using hand-collected data, we document the details of the ex-ante severance contracts and the ex-post separation pay given to S&P500 CEOs upon departing from their companies. We analyze what determines whether or not a departing CEO receives separation pay in excess of her severance contract. We find that discretionary separation pay is, on average, $8 million, which amounts to close to 242% of a CEO’s annual compensation. We investigate several potential explanations for this phenomenon and find evidence that in voluntary CEO departures, discretionary separation pay represents a governance problem. In contrast, we find evidence that in forced departures, discretionary separation pay is used to facilitate an amicable and smooth transition from the failed ex-CEO to a new CEO. These results help to shed light on the dual role played by severance compensation and on the bargaining game played between the board and the departing executive.

Number of Pages in PDF File: 39

Keywords: Executive Compensation, Severance, Separation Pay, Managerial Incentives, CEO Turnover, Bargaining

JEL Classification: G34, J33, J41

working papers series


Download This Paper

Date posted: August 19, 2011  

Suggested Citation

Huang, Peggy and Goldman, Eitan, Contractual Versus Actual Severance Pay Following CEO Turnover (August 18, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1912179 or http://dx.doi.org/10.2139/ssrn.1912179

Contact Information

Peggy Huang (Contact Author)
Tulane University - Finance & Economics ( email )
A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States
Eitan Goldman
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-856-0749 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 445
Downloads: 87
Download Rank: 61,376
Citations:  7

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.453 seconds