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Pride and Prestige: Why Some Firms Pay Their CEOs LessErnst G. MaugUniversity of Mannheim - Department of Business Administration and Finance; European Corporate Governance Institute (ECGI) Alexandra Niessen-RuenziUniversity of Mannheim - Department of Finance Evgenia ZhivotovaUniversity of Mannheim - Department of Business Administration and Finance; University of Mannheim - Graduate School of Economic and Social Sciences December 19, 2012 AFA 2013 San Diego Meetings Paper Abstract: We investigate the impact of measures of firms' prestige on CEO compensation and find that CEOs of more prestigious firms earn less. Speci fically, total CEO pay is on average 9% lower for firms listed in Fortune's ranking of America's most admired companies. We suggest that CEOs derive bene fits from working for a company that enjoys public admiration, and that boards extract pay concessions for these benefi ts. Our results are concentrated in fi rms with strong boards and in-dependent compensation committees, presumably because weak boards leave rents to powerful CEOs. We focus on two hypotheses that may explain these results. CEOs may obtain non-monetary bene fits in the form of a higher social status from working for a prestigious fi rm, or they may benefi t from enhanced career prospects. We find stronger support for the social-status hypothesis. We perform a range of robustness checks and can exclude many alternative explanations, including that prestige just proxies for better corporate governance.
Number of Pages in PDF File: 54 Keywords: CEO compensation, status, social benefits, firm prestige JEL Classification: G30, M52 working papers seriesDate posted: February 22, 2012 ; Last revised: December 31, 2012Suggested CitationContact Information
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