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Public Opinion and Executive Compensation

Management Science, 58 (7): 1249-1272, July 2012

33 Pages Posted: 20 May 2010 Last revised: 24 Apr 2014

Camelia M. Kuhnen

University of North Carolina Kenan-Flagler Business School

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Date Written: June 1, 2010

Abstract

We investigate whether public opinion influences the level and structure of executive compensation. During 1992-2008 the negativity of press coverage of CEO pay varied significantly, with stock options being the most criticized pay component. We find that after more negative press coverage of CEO pay firms reduce option grants and increase less contentious types of pay such as salary, while overall compensation does not change. The reduction in option pay after increased press negativity is more pronounced when firms, CEOs and boards have stronger reputation concerns. Our within-firm, within-year identification shows the results cannot be explained by annual changes in accounting rules regarding executive compensation, stock market conditions, or pay mean-reversion.

Keywords: executive compensation, public opinion, media coverage

JEL Classification: G34, M52, J33

Suggested Citation

Kuhnen, Camelia M. and Niessen-Ruenzi, Alexandra, Public Opinion and Executive Compensation (June 1, 2010). Management Science, 58 (7): 1249-1272, July 2012. Available at SSRN: https://ssrn.com/abstract=1612201

Camelia Kuhnen (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
(919) 9623284 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/kuhnenc/

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

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