Executive Pay and 'Independent' Compensation Consultants

Marshall School of Business Working Paper No. FBE 10-09

Journal of Accounting and Economics, Forthcoming

41 Pages Posted: 21 Jun 2008 Last revised: 24 Feb 2010

Kevin J. Murphy

University of Southern California - Marshall School of Business; USC Gould School of Law

Tatiana Sandino

Harvard Business School - Accounting and Control

Date Written: November 22, 2009

Abstract

Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to “cross-sell” services and to secure “repeat business.” We find evidence in both the US and Canada that CEO pay is higher in companies where the consultant provides other services, and that pay is higher in Canadian firms when the fees paid to consultants for other services are large relative to the fees for executive-compensation services. Contrary to expectations, we find that pay is higher in US firms where the consultant works for the board rather than for management.

Keywords: Executive Compensation, Compensation Consultants, Conflicts of Interest, CEO Pay, board of directors, director pay, corporate governance, disclosure

JEL Classification: J33, M52, M48, G38

Suggested Citation

Murphy, Kevin J. and Sandino, Tatiana, Executive Pay and 'Independent' Compensation Consultants (November 22, 2009). Marshall School of Business Working Paper No. FBE 10-09. Available at SSRN: https://ssrn.com/abstract=1148991

Kevin J. Murphy (Contact Author)

University of Southern California - Marshall School of Business ( email )

BRI 308, MC 0804
Los Angeles, CA 90089-0804
United States
213-740-6553 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States

Tatiana Sandino

Harvard Business School - Accounting and Control ( email )

367 Morgan Hall
Soldiers Field
Boston, MA 02163
United States
617-495-0625 (Phone)

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