CEO Presence on the Compensation Committee: A Puzzle

13 Pages Posted: 1 Aug 2010 Last revised: 8 Aug 2015

See all articles by Glenn Boyle

Glenn Boyle

University of Canterbury - Economics and Finance; Sapere Research Group

Helen Roberts

University of Otago - Department of Accountancy and Finance

Date Written: July 29, 2010

Abstract

Conventional wisdom suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However, using data from New Zealand – where CEO compensation committee membership was rel- atively common until quite recently – we find that annual pay increments for CEOs with this apparent advantage averaged six percentage points less than those enjoyed by other CEOs during the 1997–2005 period. After controlling for variation in firm performance, the difference is a still-sizeable four percentage points. This puzzling result cannot be explained by risk-return tradeoff considerations, interaction with other governance variables, selection bias, or variable mis-measurement.

Suggested Citation

Boyle, Glenn and Roberts, Helen, CEO Presence on the Compensation Committee: A Puzzle (July 29, 2010). Available at SSRN: https://ssrn.com/abstract=1650826 or http://dx.doi.org/10.2139/ssrn.1650826

Glenn Boyle (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Sapere Research Group ( email )

Level 9, Pencarrow House
1 Willeston St
Wellington, 6140
New Zealand

Helen Roberts

University of Otago - Department of Accountancy and Finance ( email )

PO Box 56
Dunedin, 9054
New Zealand
6434798072 (Phone)
6434798171 (Fax)

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