Does Executive Compensation Disclosure Alter Pay at the Expense of Incentives?
45 Pages Posted: 23 Jun 2006
Date Written: June 21, 2006
Abstract
According to the "keeping up with the Jones" theory promulgated by compensation consultants, compensation disclosure is responsible for increases in executive pay levels. Jensen and Murphy (1990a), however, contend that disclosure is responsible for a decline in performance pay, as public scrutiny penalizes boards that provide incentives resulting in high payouts. We provide evidence contrary to both theories using data on pay levels and incentives pre- and post-disclosure. Disclosure does not appear to alter pay levels but it does enhance incentives. Our findings suggest failure in managerial incentive contracts when pay is opaque to shareholders.
Keywords: CEO compensation, disclosure, regulation, contracts, pay levels, pay sensitivity
JEL Classification: G34, G38, J33
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
The Use of Equity Grants to Manage Optimal Equity Incentive Levels
By John E. Core and Wayne R. Guay
-
The Other Side of the Tradeoff: the Impact of Risk on Executive Compensation
-
Stock Options for Undiversified Executives
By Brian J. Hall and Kevin J. Murphy