Foreign Experience and CEO Compensation

Posted: 28 Mar 2016

See all articles by Martin J. Conyon

Martin J. Conyon

Lancaster University - Management School; Wharton School, Center for Human Resources

Lars Helge Hass

Lancaster University - Management School

Skrålan Vergauwe

EDHEC Business School - Department of Accounting; Lancaster University - Management School

Zhifang Zhang

Warwick Business School

Date Written: March 28, 2016

Abstract

This paper investigates the relation between foreign experience and CEO compensation. Using a sample of large UK firms from the FTSE 350 index from 2003 to 2011, we find that foreign-born CEOs and national CEOs with foreign working experience receive significantly higher levels of total compensation compared to those without these characteristics. We document that this foreign-CEO pay premium is stronger in firms that are more globalized. The results are robust to controlling for firm-specific economic and corporate governance characteristics as well as the endogenous CEO selection using propensity score matching. Our results show that the foreign-CEO pay premium is attributed to specialized foreign expertise rather than broader general managerial skills.

Keywords: Foreign experience, corporate governance, executive compensation

JEL Classification: G3

Suggested Citation

Conyon, Martin J. and Hass, Lars Helge and Vergauwe, Skrålan and Zhang, Zhifang, Foreign Experience and CEO Compensation (March 28, 2016). Available at SSRN: https://ssrn.com/abstract=2755631 or http://dx.doi.org/10.2139/ssrn.2755631

Martin J. Conyon (Contact Author)

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Lars Helge Hass

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Skrålan Vergauwe

EDHEC Business School - Department of Accounting ( email )

France

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Zhifang Zhang

Warwick Business School ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

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