The Effects of CEO Pay Transparency in France: Benchmarking, 'Catching-Up', and Outsider Scrutiny
33 Pages Posted: 3 Jun 2016
Date Written: March 1, 2016
The study investigates the evolution of CEO pay after the implementation of new disclosure rules in France. It opposes a managerial labor market view in which firms compete for CEO talent, and a governance institutions view that embraces managerial power, outrage constraint, and agency issues. The findings first show that closely-monitored and below-average CEOs make the most of benchmarking to catch up to their peers. The catch-up effect is partly driven by competition for talent but also by imitation and perceived fairness. Second, public disclosure places CEO pay under outsider scrutiny, producing two distinct effects: most powerful and above-average CEOs receive lower pay rises, and minority shareholders pressure firms into rising bonuses for all CEOs. Overall, transparency yields a convergence of pay levels and higher ratios of bonuses.
Keywords: CEO pay, benchmarking, managerial market, managerial power, corporate control
JEL Classification: G32; G34; L22
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