Nonmonetary Benefits, Quality of Life, and Executive Compensation

Xin Deng and Huasheng Gao

Journal of Financial and Quantitative Analysis, 2013, vol. 48, issue 1, 197-218

Abstract: We examine the effects of nonmonetary benefits on overall executive compensation from the perspective of the living environment at the firm headquarters. Companies in polluted, high crime rate, or otherwise unpleasant locations pay higher compensation to their chief executive officers (CEOs) than companies located in more livable locations. This premium in pay for quality of life is stronger when firms face tougher competition in the managerial labor market, when the CEO is hired from outside, and when the CEO has short-term career concerns. Overall, the geographic desirability of the corporate headquarters is an effective substitute for CEO monetary pay.

Date: 2013
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