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Chief Executive Officers and the Pay-Pension Tradeoff

Joseph J. Gerakos

Tuck School of Business at Dartmouth College

December 2008

The theory of equalizing differences predicts that workers trade pay for benefits, but empirical confirmation of such tradeoffs is rare. This study investigates the extent to which chief executive officers (CEOs) trade pay for pension benefits. For a sample of S&P 500 CEOs, I find that an additional dollar of pension benefits is associated with a 48 cent decrease in pay. Although the tradeoff estimate is significantly different from zero, it is also significantly less than the anticipated rate of dollar for dollar, especially for CEOs with relatively more power over their boards of directors. This implies that the implicit price of pension benefits decreases with the CEO's power, so pooling datasets on CEOs with varying degrees of power blurs the size of the pay-pension tradeoff.

Number of Pages in PDF File: 23

Keywords: Executive Compensation, Compensating Differentials, Pensions

JEL Classification: G34, J33

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Date posted: July 25, 2008 ; Last revised: February 3, 2009

Suggested Citation

Gerakos, Joseph J., Chief Executive Officers and the Pay-Pension Tradeoff (December 2008). Available at SSRN: https://ssrn.com/abstract=1166145 or http://dx.doi.org/10.2139/ssrn.1166145

Contact Information

Joseph J. Gerakos (Contact Author)
Tuck School of Business at Dartmouth College ( email )
Hanover, NH 03755
United States
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