Premium Pay for Executive Talent: An Empirical Analysis

48 Pages Posted: 14 Aug 2010 Last revised: 16 Nov 2010

Mary Ellen Carter

Boston College - Department of Accounting

Francesca Franco

London Business School

A. Irem Tuna

London Business School

Date Written: Nov 12, 2010

Abstract

We examine the extent to which executive talent at the time of the hire affects the design of the executive’s compensation contract at the hiring firm. Using a sample of executives who switched jobs at least once between 1992 and 2007, we find that our proxies for executive talent are positively associated with compensation premiums at the new employer, after controlling for the standard determinants of pay. Moreover, tests for the association between pay for executive talent and performance at the hiring firm indicate that it does not always pay off to pay a premium to attract and retain talented executives, and that this association varies with the type of talent (i.e., “perceived” versus “objective”) the hiring firm rewards.

Keywords: Executive Talent, Compensation, Incentives

JEL Classification: J33

Suggested Citation

Carter, Mary Ellen and Franco, Francesca and Tuna, A. Irem, Premium Pay for Executive Talent: An Empirical Analysis (Nov 12, 2010). AAA 2011 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: https://ssrn.com/abstract=1658903 or http://dx.doi.org/10.2139/ssrn.1658903

Mary Ellen Carter

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Francesca Franco (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

Ayse Irem Tuna

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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