Non-compensation-related consultant service and CEO compensation

Audrey Wen-hsin Hsu, Yi-Ru Shyu and Victoria Shao-Pin Wang

Journal of Contemporary Accounting and Economics, 2014, vol. 10, issue 1, 59-75

Abstract: This study examines how consultants’ non-compensation-related consulting service (NCS) affects the contractual usefulness of accounting and stock information in executive compensation, as reflected in pay-performance sensitivity. The hypothesis is based on anecdotal evidence suggesting that consultants’ provision of NCS is likely to adversely affect the quality of CEO compensation plans. We investigate whether the consultants providing NCS are involved in potential conflicts of interest. The results show that CEO pay is higher in companies where consultants provide NCS and have a higher NCS fee ratio. The pay-performance sensitivity in CEO compensation decreases when consultants engage in NCS. The overall results are consistent with NCS representing a conflict of interest and compromising the quality of compensation committees.

Keywords: CEO compensation; Compensation consultants; Non-compensation-related consulting service; Conflicts of interest; Pay-performance sensitivity (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:10:y:2014:i:1:p:59-75

DOI: 10.1016/j.jcae.2014.01.003

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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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