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Do Compensation Consultants Have Distinct Styles?

59 Pages Posted: 30 Jan 2016 Last revised: 27 Jun 2016

Chen Cai

Georgia State University - Department of Finance

Omesh Kini

Georgia State University

Ryan Williams

University of Arizona - Department of Finance

Date Written: May 21, 2016

Abstract

Using hand-collected compensation consultant data, we investigate whether compensation consultants exhibit distinct styles in the determination of CEO pay level and compensation structure. Our tests, which include the use of placebo samples that involve the scrambling of consultants as benchmarks, yield little evidence of idiosyncratic compensation consultant style. However, we do observe style-like effects and some resultant perverse outcomes either when (i) there is greater potential for client firms’ managers to take actions in their self-interest or (ii) consultants face conflicts of interest. Overall, we find evidence consistent with both the “efficient” and “agency” views of CEO compensation contracts.

Keywords: Compensation consultants; Consultant Style; Compensation structure

JEL Classification: G30, G34, J33, M12, M52, M55

Suggested Citation

Cai, Chen and Kini, Omesh and Williams, Ryan, Do Compensation Consultants Have Distinct Styles? (May 21, 2016). Available at SSRN: https://ssrn.com/abstract=2724072 or http://dx.doi.org/10.2139/ssrn.2724072

Chen Cai

Georgia State University - Department of Finance ( email )

University Plaza
Atlanta, GA 30303-3083
United States

Omesh Kini (Contact Author)

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Ryan Williams

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

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