Executive Compensation: The Trend Toward One-Size-Fits-All

79 Pages Posted: 19 Jan 2021 Last revised: 20 Jun 2024

See all articles by Felipe Cabezon

Felipe Cabezon

Virginia Tech - Pamplin College of Business

Date Written: November 9, 2020

Abstract

I report and analyze a recent "one-size-fits-all" trend in the structure of executive compensation plans. Since 2006, 24% of the variation in the distribution of CEO compensation across pay components-salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisitesdisappeared. This uniformity might come at the expense of optimal incentives, as increases in pay structure similarity translate into lower shareholder value. Using panel data regressions and plausibly exogenous shocks, I find that institutional investors' influence, proxy advisors' recommendations, and expanded compensation disclosure are salient drivers of this standardization. The findings highlight an unintended consequence of recent regulations enhancing shareholders' participation and expanding compensation disclosure.

Keywords: Executive Compensation, One-size-fits-all, Information Disclosure, Institutional Investors, Proxy advisors JEL Classification: G23, G30, G34, G38

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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