Job Security and CEO Compensation

54 Pages Posted: 9 Oct 2020

See all articles by James S. Ang

James S. Ang

Florida State University; Florida State University - College of Law

Wei Chen

Fuzhou Institute of Technology

Date Written: August 20, 2020


We analyze a sample of 2,914 hiring contracts and show how job security plays a role in pay negotiation. We find a significant impact of job security on CEO pay using both firm and industry-level measures across US firms. In general, CEO candidates and the board members would trade pay for job security. We find this pay for job security also follows a hierarchy order; when a firm is unable to compensate job risk with a higher pay, the CEO will seek for alternative ways of compensation, including a severance agreement, a shorter grant vesting period, and an incentive plan metric that is easier to achieve. Moreover, job security has no value among risk-takers, and this value increases with CEO’s risk aversion. By examining the impact of job security under different market condition, we find that this pay concession disappears when the CEO labor market is more favorable to the CEOs.

Keywords: CEO compensation, job security, risk aversion

JEL Classification: G3, G02, D81, L26

Suggested Citation

Ang, James S. and Chen, Wei, Job Security and CEO Compensation (August 20, 2020). Available at SSRN: or

James S. Ang (Contact Author)

Florida State University ( email )

College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

Wei Chen

Fuzhou Institute of Technology

#8 West Jiangbin Avenue
LianJiang County
Fuzhou, Fujian 350506

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