Public Opinion and Executive Compensation

Camelia Kuhnen and Alexandra Niessen ()
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Alexandra Niessen: Department of Finance, University of Mannheim, Mannheim 68167, Germany

Management Science, 2012, vol. 58, issue 7, 1249-1272

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. This paper was accepted by Brad Barber, finance.

Keywords: executive compensation; public opinion; media coverage (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (90)

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Working Paper: Public opinion and executive compensation (2010)
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