CEO Non-Compete Agreements, Job Risk, and Compensation
74 Pages Posted: 13 May 2018 Last revised: 1 May 2019
Date Written: April 20, 2019
Using hand-collected data on chief executive officer (CEO) non-compete agreements (NCAs), we find that CEOs are less likely to have NCAs when they expect greater personal costs and more likely when firms expect to suffer greater harm if departing CEOs work with competitors. Additionally, we find that performance–turnover sensitivity is significantly stronger when CEOs have NCAs. Finally, we find that total compensation and incentive pay are higher if CEOs have enforceable NCAs. Our identification strategy exploits staggered state-level changes in NCA enforceability. Our findings suggest that restrictions on mobility have important implications for how boards monitor and compensate CEOs.
Keywords: CEO Non-Compete Contracts; CEO Mobility, CEO Performance-Turnover Sensitivity; CEO Pay; CEO Compensation Structure
JEL Classification: G30, G32, G34, K22, L22, L25
Suggested Citation: Suggested Citation