Are Fat Cats Copycats? Evidence from Director and Consultant Network Dynamics
51 Pages Posted: 31 Aug 2016 Last revised: 6 Jan 2017
Date Written: December 26, 2016
Prior literature identifies great similarity in executive compensation packages of firms and has succeeded in hypothesizing but not in substantiating the responsible channel or channels. We introduce dynamic stochastic network techniques to directly analyze the following three possible channels simultaneously for the first time: sharing directors, sharing compensation consultants, and sharing industry membership. Using the dynamic technology, we show that package similarity is achieved by sharing directors and industry membership rather than by sharing compensation consultants. Moreover, boards with fewer females are more likely to include higher proportions of options compensation, and higher fixed compensation deters tie formation.
Keywords: Board interlocking network, executive compensation package design, selection, imitation, compensation consultants
JEL Classification: G31, G32
Suggested Citation: Suggested Citation