Determinants of CEO Compensation: Generalist-Specialist Versus Insider-Outsider Attributes

56 Pages Posted: 17 Mar 2017

See all articles by Paul Brockman

Paul Brockman

Lehigh University - College of Business

Hye Seung (Grace) Lee

Fordham University - Accounting Area

Jesus M. Salas

Lehigh University

Date Written: March 31, 2016

Abstract

We examine the distinct effects of generalist-specialist versus insider-outsider attributes on Chief Executive Officer (CEO) compensation patterns. Our cross-sectional results show that each attribute has a significant impact on both the level and structure of CEO compensation. CEOs with a high generalist-outsider combination receive the highest total compensation, followed by generalist-insiders, specialist-outsiders, and finally specialist-insiders. Our time-series results show that the generalist-specialist effect remains constant through time while the insider-outsider effect diminishes over time. These findings suggest that the generalist premium is the result of a fundamental shift in the need for generalist skills to manage increasingly-complex enterprises. In contrast, the outsider premium is more likely caused by a temporary increase in bargaining power during contract negotiations. Overall, our study disentangles generalist-specialist attributes from insider-outsider attributes and then identifies the specific channels through which each attribute affects executive compensation.

Keywords: Executive compensation, CEO insiderness, Generalist skills

JEL Classification: G30, G34, J33

Suggested Citation

Brockman, Paul and Lee, Hye Seung (Grace) and Salas, Jesus M., Determinants of CEO Compensation: Generalist-Specialist Versus Insider-Outsider Attributes (March 31, 2016). Journal of Corporate Finance, Vol. 39, No. C, 2016. Available at SSRN: https://ssrn.com/abstract=2933874

Paul Brockman (Contact Author)

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Hye Seung (Grace) Lee

Fordham University - Accounting Area ( email )

Graduate School of Business
113 W. 60th Street
New York, NY 10023
United States

Jesus M. Salas

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3238 (Phone)

HOME PAGE: http://www3.lehigh.edu/business/faculty/salas.asp

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