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The Incentives of Compensation Consultants and CEO Pay

Journal of Accounting and Economics, Forthcoming

43 Pages Posted: 13 Mar 2008 Last revised: 8 Jul 2009

Brian D. Cadman

University of Utah - David Eccles School of Business

Mary Ellen Carter

Boston College - Department of Accounting

Stephen A. Hillegeist

Arizona State University (ASU) - W. P. Carey School of Business, School of Accountancy

Date Written: February 1, 2009

Abstract

We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients (Waxman, 2007). Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.

Keywords: Executive Compensation, Compensation Consultants

JEL Classification: J33, G34

Suggested Citation

Cadman, Brian D. and Carter, Mary Ellen and Hillegeist, Stephen A., The Incentives of Compensation Consultants and CEO Pay (February 1, 2009). Journal of Accounting and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1103682

Brian Cadman (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 Campus Center Drive
Salt Lake City, UT 84112
United States
801-585-9517 (Phone)

HOME PAGE: http://www.business.utah.edu/bio/briancadman

Mary Ellen Carter

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Stephen Hillegeist

Arizona State University (ASU) - W. P. Carey School of Business, School of Accountancy ( email )

Tempe, AZ 85287-3706
United States
480-965-6614 (Phone)

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