The incentives of compensation consultants and CEO pay

Brian Cadman, Mary Ellen Carter, Stephen Hillegeist

Research output: Contribution to journalArticle

59 Citations (Scopus)

Abstract

We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest among compensation consultants. United States House of Representatives Committee on Oversight and Government Reform Majority Staff, December]. Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.

Original languageEnglish (US)
Pages (from-to)263-280
Number of pages18
JournalJournal of Accounting and Economics
Volume49
Issue number3
DOIs
StatePublished - Apr 2010
Externally publishedYes

Fingerprint

Consultants
Incentives
CEO pay
Conflict of interest
Oversight
Executive pay
Low pay
Government
Cross-selling
Staff
Pay-performance sensitivity
Revenue

Keywords

  • Compensation consultants
  • Corporate advisors
  • Executive compensation

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

The incentives of compensation consultants and CEO pay. / Cadman, Brian; Carter, Mary Ellen; Hillegeist, Stephen.

In: Journal of Accounting and Economics, Vol. 49, No. 3, 04.2010, p. 263-280.

Research output: Contribution to journalArticle

Cadman, Brian ; Carter, Mary Ellen ; Hillegeist, Stephen. / The incentives of compensation consultants and CEO pay. In: Journal of Accounting and Economics. 2010 ; Vol. 49, No. 3. pp. 263-280.
@article{077d3089bd894ed2af475b776daaeb1c,
title = "The incentives of compensation consultants and CEO pay",
abstract = "We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest among compensation consultants. United States House of Representatives Committee on Oversight and Government Reform Majority Staff, December]. Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.",
keywords = "Compensation consultants, Corporate advisors, Executive compensation",
author = "Brian Cadman and Carter, {Mary Ellen} and Stephen Hillegeist",
year = "2010",
month = "4",
doi = "10.1016/j.jacceco.2009.03.002",
language = "English (US)",
volume = "49",
pages = "263--280",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier",
number = "3",

}

TY - JOUR

T1 - The incentives of compensation consultants and CEO pay

AU - Cadman, Brian

AU - Carter, Mary Ellen

AU - Hillegeist, Stephen

PY - 2010/4

Y1 - 2010/4

N2 - We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest among compensation consultants. United States House of Representatives Committee on Oversight and Government Reform Majority Staff, December]. Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.

AB - We examine whether compensation consultants' potential cross-selling incentives explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006. Critics allege that these incentives lead consultants to bias their advice to secure greater revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest among compensation consultants. United States House of Representatives Committee on Oversight and Government Reform Majority Staff, December]. Among firms that retain consultants, we are unable to find widespread evidence of higher levels of pay or lower pay-performance sensitivities for clients of consultants with potentially greater conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts of interest between the firm and its consultant are a primary driver of excessive CEO pay.

KW - Compensation consultants

KW - Corporate advisors

KW - Executive compensation

UR - http://www.scopus.com/inward/record.url?scp=76849091699&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=76849091699&partnerID=8YFLogxK

U2 - 10.1016/j.jacceco.2009.03.002

DO - 10.1016/j.jacceco.2009.03.002

M3 - Article

VL - 49

SP - 263

EP - 280

JO - Journal of Accounting and Economics

JF - Journal of Accounting and Economics

SN - 0165-4101

IS - 3

ER -