Compensation Consultants and Executive Pay: Evidence from the United States and the United Kingdom

25 Pages Posted: 18 Mar 2008 Last revised: 21 May 2008

See all articles by Martin J. Conyon

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources

Date Written: May 2008

Abstract

Executive compensation consultants are investigated using data from the United States and the United Kingdom. The study yields a number of findings. First, CEO pay is generally greater in firms that use compensation consultants, consistent with a rent-extraction theory of executive pay. Second, the amount of equity used in the overall compensation package, such as stock options, is greater in firms that use consultants. This is consistent with an optimal contract theory of pay which aligns manager and shareholder interests. Third, there is little evidence that consultants with potential conflicts of interest, such as supplying other business to client firms, leads to greater CEO pay or the adverse design of pay contracts.

Keywords: Compensation consultants

JEL Classification: G3

Suggested Citation

Conyon, Martin J., Compensation Consultants and Executive Pay: Evidence from the United States and the United Kingdom (May 2008). Available at SSRN: https://ssrn.com/abstract=1106729 or http://dx.doi.org/10.2139/ssrn.1106729

Martin J. Conyon (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

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