CEO Marketability, Employment Opportunities, and Compensation: Evidence from Compensation Peer Citations
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
64 Pages Posted: 20 Jan 2017 Last revised: 23 Apr 2021
Date Written: February 22, 2021
Mandatory disclosure of CEO compensation peers signals potential outside opportunities for the cited CEOs by revealing which companies view them as viable executive candidates. CEOs cited often as compensation peers – especially by larger firms, which represent attractive employment opportunities – are more likely to leave for better positions or receive compensation increases. Equity-based awards following cites by larger firms have shorter vesting periods, suggesting these CEOs gain negotiating power relative to their boards. The disclosure requirement enhanced labor market transparency and led to higher compensation for highly cited CEOs without penalizing less cited CEOs, putting upward pressure on CEO compensation.
Keywords: compensation peers, outside opportunities, 2006 disclosure rule, labor market, compensation
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