 Keeping up with CEO Jones: Benchmarking and executive compensationJournal of Economic Behavior & Organization, 2013, vol. 93, issue C, 78-100 Abstract: This paper seeks to understand the role that peer comparisons play in the determination of executive compensation. I exploit a recent change in the Securities and Exchange Commission's regulations that requires firms to disclose the peer companies used for determining the compensation of their top executives. Using a new dataset of S&P 900 companies’ choice of benchmarking firms during two fiscal periods (2007 and 2008), I investigate what determines the choice of comparison firms. I find that companies have a preference for choosing higher-CEO-compensation firms as their benchmark. Though I find that companies prefer to choose as their benchmark peers with similar firm characteristics, for CEO compensation, this effect is countered by a preference for firms with higher-than-own CEO compensation. Using the complete map of firms’ choices, I implement an instrumental variable strategy that uses the characteristics of peers-of-peers to estimate the effect of others’ compensation on own compensation. For Fiscal Year 2007, I find an elasticity of 0.5. Keywords: Executive compensation; Peer effects; Benchmark; CEO (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:93:y:2013:i:c:p:78-100 DOI: 10.1016/j.jebo.2013.07.002 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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