CEO Marketability, Employment Opportunities, and Compensation: Evidence from Compensation Peer Citations
70 Pages Posted: 20 Jan 2017 Last revised: 19 Dec 2019
Date Written: December 18, 2019
We present evidence that the 2006 compensation-peer disclosure rule increased executive labor market efficiency by revealing information about executives’ outside opportunities. Difference-in-differences tests provide evidence of increased CEO mobility and compensation levels after the rule was enacted. Executives of firms with more peer citations – especially from larger firms – are more likely to leave for better positions or to receive compensation increases. Highly-cited firms are more likely to increase equity-based compensation, which helps with executive retention. These results are noteworthy since the intent of the rule was to limit opportunistic benchmarking to justify higher compensation.
Keywords: compensation peers, outside opportunities, 2006 disclosure rule, labor market efficiency, compensation
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