Executive Compensation: The Trend Toward One Size Fits All

Abstract

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