TITLE:
Determinants of CEO Compensation before and after the Financial Crisis
AUTHORS:
Ralph Sonenshine, Nathan Larson, Michael Cauvel
KEYWORDS:
Mergers and Divestitures, CEO Compensation, Board Composition, Stock Market Performance, Principal Agent, Managerial Power
JOURNAL NAME:
Modern Economy,
Vol.7 No.12,
November
16,
2016
ABSTRACT: 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.