CEO Presence on the Compensation Committee: A Puzzle

Glenn Boyle and Helen Roberts

No 19222, Working Paper Series from Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation

Abstract: Conventional wisdom suggests that CEO membership of the compensation committee is an open invitation to rent extraction by self-serving executives. However using data from New Zealand - where CEO compensation committee membership is relatively common - we find that annual pay increments for CEOs with this apparent advantage averaged six percentage points less than those enjoyed by other CEOs during the 1997-2005 period. After controlling for variation in firm performance the difference is a still-sizeable four percentage points. This puzzling result cannot be explained by risk-return tradeoff considerations interaction with other governance variables selection bias or variable mis-measurement.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:vuw:vuwcsr:19222

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