Does the Market for CEO Talent Explain Controversial CEO Pay Practices?
Review of Finance, Forthcoming
55 Pages Posted: 26 Mar 2008 Last revised: 17 Apr 2014
Date Written: May 21, 2013
Benchmarking, pay for luck, and the large compensation packages given to CEOs in recent years are three major controversial compensation practices. We examine the extent to which variation in the market for CEO talent explains these practices. We find that CEO compensation is benchmarked against other firms only in industries where CEO talent is not firm-specific, and that pay for luck is more prevalent there also. These findings are consistent with theories based on the market for CEO talent. However, CEO compensation levels do not depend on whether CEO talent is firm-specific, which seems inconsistent with the talent competition argument.
Keywords: CEO Compensation, talent, Skills, CEO Turnover, talent pools, pay for luck
JEL Classification: J33, G34
Suggested Citation: Suggested Citation