CEO Marketability, Employment Opportunities, and Compensation: Evidence from Compensation Peer Citations

Daewoung Choi, David Cicero and Shawn Mobbs

Journal of Financial and Quantitative Analysis, 2022, vol. 57, issue 7, 2766-2797

Abstract: Mandatory disclosure of CEO compensation peers signals potential outside opportunities for the cited CEOs by revealing which companies view them as viable executive candidates. CEOs cited often as compensation peers (especially by larger firms, which represent attractive employment opportunities) are more likely to leave for better positions or receive compensation increases. Equity-based awards following cites by larger firms have shorter vesting periods, suggesting these CEOs gain negotiating power relative to their boards. The disclosure requirement enhanced labor market transparency and led to higher compensation for highly cited CEOs without penalizing less cited CEOs, putting upward pressure on CEO compensation.

Date: 2022
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