Mandated Compensation Disclosures and CEO Pay

54 Pages Posted: 27 Jul 2009

See all articles by John R. Robinson

John R. Robinson

Texas A&M University; Texas A&M University - Department of Accounting

Yong Yu

University of Texas at Austin

Yanfeng Xue

George Washington University - Department of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: July 26, 2009

Abstract

Mandated compensation disclosures provide important information for investors and may play a governance role in reducing excessive compensation and disciplining management. We utilize SEC evaluations of compensation disclosures mandated by rules adopted in 2006 to investigate whether noncompliance with the new regulations is associated with excessive CEO compensation, previous media attention, or proprietary costs. We also test whether subsequent CEO compensation is associated with the level of noncompliance identified by these publicized SEC reviews. We construct several measures of defective disclosures from SEC comment letters and find that disclosure defects are positively associated with excess CEO compensation and media criticism of CEO compensation during the previous year. We find no evidence supporting the contention that compensation disclosure defects are associated with proprietary costs. Furthermore, we present some evidence that the level of defects in pay-for-performance disclosures identified by the SEC is associated with a reduction in excess CEO compensation in the subsequent year.

Keywords: executive compensation, mandatory disclosures, noncompliance

JEL Classification: M52, G32, G38

Suggested Citation

Robinson, John R. and Yu, Yong and Xue, Yanfeng, Mandated Compensation Disclosures and CEO Pay (July 26, 2009). Available at SSRN: https://ssrn.com/abstract=1439313 or http://dx.doi.org/10.2139/ssrn.1439313

John R. Robinson (Contact Author)

Texas A&M University ( email )

mail stop 4353
Mays School of Business
college state, TX 77843-4353
United States
979-845-3457 (Phone)
979-845-0028 (Fax)

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
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Yong Yu

University of Texas at Austin ( email )

1 University Station B6400
Austin, TX 78712
United States
(512)471-6714 (Phone)
(512)471-3904 (Fax)

Yanfeng Xue

George Washington University - Department of Accountancy ( email )

School of Business and Public Management
Washington, DC 20052
United States

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