The Bright Side of Asymmetric Benchmarking: Evidence from Top Management Team Pay

52 Pages Posted: 18 Mar 2009

See all articles by Bill B. Francis

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Kose John

New York University (NYU) - Department of Finance

Zenu Sharma

St John's University; Rensselaer Polytechnic Institute

Date Written: March 17, 2009

Abstract

CEOs and top management team members have incentives to influence their own pay. Asymmetric benchmarking of pay for CEOs has been linked to the CEO's control over the pay-setting process in previous research. This paper examines whether asymmetric benchmarking of pay exists for top management team members. The presence of asymmetric benchmarking of pay could on one hand suggest that managers are involved in skimming and on the other hand it could mean that firms insulate managers to prevent them from accessing outside opportunities. Using ExecuComp firms from 1992-2007, we find that top management team members are rewarded for good luck but they are not penalized bad luck. Unlike CEOs, asymmetric benchmarking of pay for top management team members is consistent with the retention hypothesis rather than skimming. In particular, we find that asymmetric benchmarking of pay for top management team members has a positive relationship with firm value.

Keywords: CEO compensation,TMT Compensation,Benchmarking, Pay for luck

JEL Classification: D8, G3,J3

Suggested Citation

Francis, Bill B. and Hasan, Iftekhar and John, Kose and Sharma, Zenu, The Bright Side of Asymmetric Benchmarking: Evidence from Top Management Team Pay (March 17, 2009). Available at SSRN: https://ssrn.com/abstract=1361891 or http://dx.doi.org/10.2139/ssrn.1361891

Bill B. Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

Troy, NY 12180
United States

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Kose John

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0337 (Phone)
212-995-4233 (Fax)

Zenu Sharma (Contact Author)

St John's University ( email )

8000 Utopia Pkwy
Queens, NY 11439
United States
7189905496 (Phone)

Rensselaer Polytechnic Institute ( email )

Troy, NY 12180
United States

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