Executive Compensation: The Trend Toward One Size Fits All

76 Pages Posted: 19 Jan 2021 Last revised: 16 Dec 2022

See all articles by Felipe Cabezon

Felipe Cabezon

Virginia Tech - Pamplin College of Business

Date Written: November 9, 2020


This paper reports a "one-size-fits-all" trend in the structure of executive compensation plans. The distribution of compensation across pay components —salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites— has become more similar since 2006. 24% of the variation across firms disappeared in the last thirteen years. Using panel data regressions and plausibly exogenous shocks, I find that institutional investors' influence on management decisions and proxy advisors' recommendations are salient sources of this standardization. Finally, I find evidence suggesting that uniformity might come at the expense of optimal incentives, as increases in compensation similarity translate into lower shareholder value.

Keywords: Corporate Governance, Executives, Shareholder, Corporate Voting, Corporate Regulation

JEL Classification: G30, G34, G38

Suggested Citation

Cabezon, Felipe, Executive Compensation: The Trend Toward One Size Fits All (November 9, 2020). Available at SSRN: https://ssrn.com/abstract=3727623 or http://dx.doi.org/10.2139/ssrn.3727623

Felipe Cabezon (Contact Author)

Virginia Tech - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

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