Are Us CEOS Paid More than UK CEOS? Inferences from Risk-Adjusted Pay
51 Pages Posted: 12 Jun 2006 Last revised: 16 Nov 2011
Date Written: April 6, 2009
We compute and compare risk-adjusted pay for US and UK CEOs, where the adjustment is based on estimated risk premiums stemming from the equity incentives borne by CEOs. Controlling for firm and industry characteristics, we find that US CEOs have higher pay, but also bear much higher stock and option incentives than UK CEOs. Using reasonable estimates of risk premiums, we find that risk-adjusted US CEO pay does not appear large compared to that of UK CEOs. We also examine differences in pay and equity incentives between a sample of non-UK European CEOs and a matched sample of US CEOs, and find that risk-adjusting pay may explain about half of the apparent higher pay for US CEOs.
Keywords: CEO compensation, equity incentives, corporate governance, international comparisons
JEL Classification: G30, G34, J30, M52
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