Pay Me Later: Inside Debt and its Role in Managerial Compensation
59 Pages Posted: 12 May 2005
Though widely used in executive compensation, inside debt has been almost entirely overlooked by prior work. We initiate this research by studying CEO pension arrangements in 237 large capitalization firms. Among our findings are that CEO compensation exhibits a balance between debt and equity incentives; the balance shifts systematically away from equity and toward debt as CEOs grow older; annual increases in pension entitlements represent about 10% of overall CEO compensation, and about 13% for CEOs aged 61 to 65; CEOs with high debt incentives manage their firms conservatively; and pension compensation influences patterns of CEO turnover and cash compensation.
Keywords: CEO pensions, inside debt, deferred compensation
JEL Classification: G34, J33
Suggested Citation: Suggested Citation