Abstract

http://ssrn.com/abstract=2024129
 
 

Citations (3)



 


 



Is Disclosure an Effective Cleansing Mechanism? The Dynamics of Compensation Peer Benchmarking


Michael W. Faulkender


University of Maryland - Robert H. Smith School of Business

Jun Yang


Indiana University - Kelley School of Business - Department of Finance

March 15, 2012

AFA 2013 San Diego Meetings Paper

Abstract:     
Firms routinely justify CEO compensation by benchmarking against companies with highly paid CEOs. We examine whether the 2006 regulatory requirement of disclosing compensation peers mitigated firms’ opportunistic peer selection activities. We find that strategic peer benchmarking did not disappear after enhanced disclosure. In fact, it intensified at firms with low institutional ownership, low director ownership, low CEO ownership, busy boards, large boards, and non-intensive monitoring boards, and at firms with shareholders complaining about compensation practices. The effect is also stronger at firms with new CEOs. These findings call into question whether disclosure regulation can remedy potential problems in compensation practices.

Number of Pages in PDF File: 34

Keywords: disclosure regulation, corporate governance, executive compensation, peer groups, benchmarking

JEL Classification: G34, J31, J33

working papers series


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Date posted: March 18, 2012 ; Last revised: May 14, 2014

Suggested Citation

Faulkender, Michael W. and Yang, Jun, Is Disclosure an Effective Cleansing Mechanism? The Dynamics of Compensation Peer Benchmarking (March 15, 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2024129 or http://dx.doi.org/10.2139/ssrn.2024129

Contact Information

Michael W. Faulkender (Contact Author)
University of Maryland - Robert H. Smith School of Business ( email )
College Park, MD 20742-1815
United States
Jun Yang
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3395 (Phone)
812-855-5875 (Fax)

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