Are Us CEOS Paid More than UK CEOS? Inferences from Risk-Adjusted Pay

51 Pages Posted: 12 Jun 2006 Last revised: 16 Nov 2011

See all articles by Martin J. Conyon

Martin J. Conyon

Lancaster University - Management School; Wharton School, Center for Human Resources

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Wayne R. Guay

University of Pennsylvania - Accounting Department

Date Written: April 6, 2009

Abstract

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

Suggested Citation

Conyon, Martin J. and Core, John E. and Guay, Wayne R., Are Us CEOS Paid More than UK CEOS? Inferences from Risk-Adjusted Pay (April 6, 2009). Available at SSRN: https://ssrn.com/abstract=907469 or http://dx.doi.org/10.2139/ssrn.907469

Martin J. Conyon (Contact Author)

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02138
United States

Wayne R. Guay

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

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