Serial CEO Incentives and the Structure of Managerial Contracts

61 Pages Posted: 6 Mar 2008 Last revised: 31 Oct 2018

See all articles by Mariassunta Giannetti

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: December 1, 2010

Abstract

I explore CEOs' incentives to select firm strategies and to acquire firm-specific skills when a few potential employers seeking to hire experienced CEOs create incentives for job-hopping. Several features of managerial compensation, such as benchmarking of pay to larger and more prestigious companies, payments unrelated to past performance, unrestricted stock awards for highly paid CEOs, long-term incentives, and higher pay in companies granting long-term incentives, emerge in the optimal contract. I argue that the model can jointly explain the surge in U.S. CEO compensation and the differences in the structure and the level of managerial compensation across countries and across firms within a country.

Keywords: Optimal contracts, executive compensation, managerial labor market, short-termism

JEL Classification: G32, J33, L14

Suggested Citation

Giannetti, Mariassunta, Serial CEO Incentives and the Structure of Managerial Contracts (December 1, 2010). AFA 2009 San Francisco Meetings Paper; EFA 2008 Athens Meetings Paper; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 153/2007. Available at SSRN: https://ssrn.com/abstract=889040 or http://dx.doi.org/10.2139/ssrn.889040

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
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SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
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HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

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111 60 Stockholm
Sweden

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