Network connections, CEO compensation and involuntary turnover: The impact of a friend of a friend

Steven Balsam, So Yean Kwack and Jae Young Lee

Journal of Corporate Finance, 2017, vol. 45, issue C, 220-244

Abstract: We show that hard to observe, indirect connections between a CEO and “independent” board members are associated with higher CEO compensation. While we find this result for the “friend of a friend” connection, we do not find it for direct connections, i.e. friends sitting on the board. We postulate that this differential result is caused by directors with readily observable connections to the CEO being wary of provoking outrage. In contrast we find both types of connections associated with reduced involuntary CEO turnover, suggesting that outrage is not as big a concern, e.g., compensation is the foci of stakeholders.

Keywords: CEO compensation; CEO turnover; Connections; Indirect connections; Direct connections (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:45:y:2017:i:c:p:220-244

DOI: 10.1016/j.jcorpfin.2017.05.001

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