Abstract
We investigate whether public opinion influences the level and structure of executive compensation. During 1992-2008, the negativity of press coverage of chief executive officer (CEO) pay varied significantly, with stock options being the most criticized pay component. We find that after more negative press coverage of CEO pay, firms reduce option grants and increase less contentious types of pay such as salary, although overall compensation does not change. The reduction in option pay after increased press negativity is more pronounced when firms, CEOs, and boards have stronger reputation concerns. Our within-firm, within-year identification shows the results cannot be explained by annual changes in accounting rules regarding executive compensation, stock market conditions, or pay mean reversion.
Journal Information
Management Science is a cross-functional, multidisciplinary examination of advances and solutions supporting enhanced strategic planning and management science. Includes relevant contributions from diverse fields: Accounting and finance Business strategy Decision analysis Information systems Manufacturing and distribution Marketing Mathematical programming and networks Organization performance Public sector applications R&D;/innovation Stochastic models and simulation Strategy and design Supply chain management