Author(s)

Ralph Sonenshine, Nathan Larson, Michael Cauvel

Economics Department, American University, Washington DC, USA.

This paper revisits the determinants of CEO compensation using recent data (covering 125 firms from 2003 to 2012). We focus in particular on how CEO pay changed after the 2008 financial crisis. Post-crisis, the composition of pay shifted away from cash toward equity. Furthermore, post-crisis pay is tied more closely to performance and less closely to factors (like firm size) that are more tenuously connected to shareholder value. We also investigate the impact of mergers and divestitures on CEO pay, overall and before and after the crisis. Finally, we consider the role that board composition plays in CEO compensation and find that CEOs take larger post-crisis pay cuts when they have more employees on their boards.

Mergers and Divestitures, CEO Compensation, Board Composition, Stock Market Performance, Principal Agent, Managerial Power

Sonenshine, R. , Larson, N. and Cauvel, M. (2016) Determinants of CEO Compensation before and after the Financial Crisis. Modern Economy, 7, 1455-1477. doi: 10.4236/me.2016.712133.