Why have CEO pay levels become less diverse?  (R&R Journal of Finance)

Torsten Jochem; Gaizka Ormazabal; Anjana Rajamani

doi:10.2139/ssrn.3716765

Why have CEO pay levels become less diverse? (R&R Journal of Finance)

Torsten Jochem, Gaizka Ormazabal, Anjana Rajamani

Department of Finance

Research output: Working paper › Academic

Abstract

We document that the cross-sectional variation in CEO pay levels has declined precipitously, both at the economy level and within industry and size groups. We find evidence consistent with one explanation; reciprocal benchmarking (i.e., firms including each other in the set of peers used to benchmark pay). We find support for three factors contributing to the rise in reciprocal benchmarking; the mandatory disclosure of compensation peer groups, say on pay, and proxy advisory influence. Finally, we find that reciprocal benchmarking has meaningful economic consequences; lower external tournament incentives, lower risk-taking, lower stock performance, and higher stock return synchronicity within industries.

Original language	English
Number of pages	97
DOIs	https://doi.org/10.2139/ssrn.3716765
Publication status	Published - 15 Mar 2024

Bibliographical note

© Torsten Jochem, Gaizka Ormazabal and Anjana Rajamani 2021. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

JEL Classification: G3, G34, G38, M12, M52

Research programs

RSM F&A

Access to Document

10.2139/ssrn.3716765

Cite this

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