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- Title
Compensation Consultant Fees and CEO Pay.
- Authors
Cho, Jeh-Hyun; Hwang, Iny; Hyun, Jeong-Hoon; Shin, Jae Yong
- Abstract
While compensation consultants are known to play an important role in the design of executive compensation contracts, evidence on the effect of consultant incentives on CEO pay is mixed. Using compensation consultant observations with mandatory fee disclosures, which a prior study identifies as an optimal pay setter, we examine whether CEO pay is associated with consultants' incentives to retain clients, measured by fees for executive compensation services. In contrast to previous studies that find no support for repeat business incentives, we find evidence that CEO pay is higher when consultants receive abnormally high fees, demonstrating a strong incentive to retain the client, and that this positive association occurs only in weakly governed firms. This finding highlights the importance of consultant incentives and corporate governance in executive compensation settings. JEL Classifications: M12; G34; G38. Data Availability: Data used in this study are publicly available.
- Subjects
EXECUTIVE compensation; WAGES; CONSULTANTS; CHIEF executive officers; ADMINISTRATIVE fees
- Publication
Journal of Management Accounting Research, 2020, Vol 32, Issue 1, p51
- ISSN
1049-2127
- Publication type
Article
- DOI
10.2308/jmar-52434