Mario Daniele Amore, Sebastian Schwenen, 09 August 2020

Do CEOs always earn their pay? Using data on executive compensation along with accounting data for S&P 1500 firms,this column explores how swings in firm value that are unrelated to CEO actions (i.e. ‘luck’) affect CEOs’ opportunities in the labour market and the performance of firms that hire lucky CEOs. It finds that luck makes CEOs more likely to move to a new firm subject to low analyst coverage and in less competitive industries, where they receive a higher pay compared to industry peers. Hiring lucky CEOs harms firm performance due to a surge in operating costs and a poorer usage of corporate assets.

Lucas Davis, Catherine Hausman, 18 January 2019

Rises and falls in oil prices impact the macroeconomy, the stock market, investment, and of course the value of oil and gas firms. What happens to the fortunes of the leaders of those oil and gas firms? This column argues that the compensation of US oil and gas executives is closely tied to oil prices – much more closely than economic theory would predict. Theory says that executives should be rewarded for the value they bring to a firm, and that they should be incentivised to take the best actions on behalf of the firm. With billions of dollars at stake each year, boards and shareholders may want to revisit how compensation is structured at these firms.

Wolfgang Keller, Will Olney, 09 June 2017

Growing income inequality has been a hallmark of developed economies over the past few decades. Despite a large empirical literature exploring the determinants of this trend, to date few studies have explored the role of globalisation. Using US data on executive compensation, this column argues that while firm size, technology, and poor governance have all contributed to the growth in top incomes, globalisation is just as important in explaining the trend.

Joanne Lindley, Steven McIntosh, 21 September 2014

Individuals who work in the finance sector enjoy a significant wage advantage. This column considers three explanations: rent sharing, skill intensity, and task-biased technological change. The UK evidence suggests that rent sharing is the key. The rising premium could then be due to changes in regulation and the increasing complexity of financial products creating more asymmetric information.

Alex Edmans, 11 September 2014

Executive pay is a controversial political issue with big implications for firm performance. Although public debate focuses on the level of compensation – or at best its sensitivity to firm performance – this column argues that the key issue is its temporal structure. A well designed payment structure can align CEO incentives with long-term shareholder value. The authors recommend lengthening the vesting period of equity and options.

Alex Bryson, John Forth, Minghai Zhou, 24 June 2014

Publicly traded companies are the engine behind China’s growth, which raises the question of how CEO compensation works under an interventionist state. This column presents an analysis of executive compensation in China and a comparison to the West. Chinese listed firms have incentive structures similar to those of the US; in this case, effective compensation policies seem to transcend political boundaries.

Ian Gregory-Smith, Steve Thompson, Peter Wright, 24 March 2014

In 2003, the UK adopted a ‘say on pay’ policy, whereby quoted companies’ executive compensation offers have to be put to a shareholder vote. This column presents evidence that this policy has had a relatively modest impact on executive pay. A 10% increase in compensation is associated with an increase in shareholder dissent against the proposal of just 0.2%. However, remuneration committees representing the more highly rewarded CEOs are quite sensitive to dissent, provided it exceeds a critical threshold of about 10%. Shareholders do not appear more anxious about pay since the crisis.

Alex Edmans, Xavier Gabaix, 24 June 2009

Many blame executive compensation for encouraging shortsighted risk-taking. This column argues that compensation should be structured so as to provide incentives consistent with the firm’s position and long-term interest. It proposes “incentive accounts” that it says would be superior to existing compensation schemes.


CEPR Policy Research