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http://ssrn.com/abstract=2116525
 
 

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Generalists Versus Specialists: Lifetime Work Experience and CEO Pay


Claudia Custodio


Arizona State University - W. P. Carey School of Business

Miguel A. Ferreira


Nova School of Business and Economics; European Corporate Governance Institute (ECGI)

Pedro P. Matos


University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

July 2, 2012

Journal of Financial Economics (JFE), Forthcoming
Darden Business School Working Paper No. 2116525

Abstract:     
We show that pay is higher for CEOs with general managerial skills gathered during lifetime work experience. We use CEOs’ résumés of S&P 1,500 firms from 1993 through 2007 to construct an index of general skills that are transferable across firms and industries. We estimate an annual pay premium for generalist CEOs — those with an index value above the median — of 19% relative to specialist CEOs, which represents nearly a million dollars per year. This relation is robust to the inclusion of firm- and CEO-level controls, including fixed effects. CEO pay increases the most when firms externally hire a new CEO and switch from a specialist to a generalist CEO. Furthermore, the pay premium is higher when CEOs are hired to perform complex tasks such as restructurings and acquisitions. Our findings provide direct evidence of the increased importance of general managerial skills over firm-specific human capital in the market for CEOs in the last decades.

Number of Pages in PDF File: 56

Keywords: Executive compensation, Market for executives, Human capital

JEL Classification: G34, J24, J33

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Date posted: July 26, 2012  

Suggested Citation

Custodio, Claudia and Ferreira, Miguel A. and Matos, Pedro P., Generalists Versus Specialists: Lifetime Work Experience and CEO Pay (July 2, 2012). Journal of Financial Economics (JFE), Forthcoming; Darden Business School Working Paper No. 2116525. Available at SSRN: http://ssrn.com/abstract=2116525

Contact Information

Claudia Custodio
Arizona State University - W. P. Carey School of Business ( email )
W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
480-965-8074 (Phone)
480-965-8539 (Fax)
HOME PAGE: http://www.public.asu.edu/~cpcustod/
Miguel Almeida Ferreira (Contact Author)
Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Pedro P. Matos
University of Virginia - Darden School of Business ( email )
University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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