Is it better to say goodbye? When former executives set executive pay

Christian Andres, Erik Fernau and Erik Theissen

No 12-02, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: In the German two-tiered system of corporate governance, it is common practice for chief executive officers (CEOs) to become the chairman of the supervisory board of the same company upon retirement. As members of the supervisory board, they are involved in setting the pay for their successors as well as for their former colleagues. We analyze a panel covering 150 listed firms and the period 1998-2007. We show that firms in which a former CEO serves as the chairman of the board of directors pay their executives significantly more. We find no difference in the compensation for the members of the supervisory board. Thus, former CEOs apparently exert their influence to increase the pay of their former colleagues and their successor, but not their own pay.

Keywords: executive compensation; board structure; two-tiered board (search for similar items in EconPapers)
JEL-codes: G30 G38 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-bec, nep-hme and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1202

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