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CEO Marketability, Employment Opportunities, and Compensation: Evidence from Compensation Peer Citations

Published online by Cambridge University Press:  29 April 2022

Daewoung Choi ,
David Cicero Open the ORCID record for David Cicero [Opens in a new window]  and
Shawn Mobbs Open the ORCID record for Shawn Mobbs [Opens in a new window]
Daewoung Choi
Affiliation:
Louisiana State University in Shreveport Department of Economics and Financejoey.choi@lsus.edu
David Cicero
Affiliation:
Auburn University Department of Financedavidcicero@auburn.edu
Shawn Mobbs*
Affiliation:
University of Alabama Culverhouse College of Business
*
smobbs@cba.ua.edu (corresponding author)
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Abstract

Mandatory disclosure of CEO compensation peers signals potential outside opportunities for the cited CEOs by revealing which companies view them as viable executive candidates. CEOs cited often as compensation peers (especially by larger firms, which represent attractive employment opportunities) are more likely to leave for better positions or receive compensation increases. Equity-based awards following cites by larger firms have shorter vesting periods, suggesting these CEOs gain negotiating power relative to their boards. The disclosure requirement enhanced labor market transparency and led to higher compensation for highly cited CEOs without penalizing less cited CEOs, putting upward pressure on CEO compensation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 7 , November 2022 , pp. 2766 - 2797
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We are grateful for comments and suggestions from Anup Agrawal, Kee Hong Bae, Douglas Cook, Junsoo Lee, Kai Li, Si Li, Paul Malatesta (the editor), Pedro Matos, Tijana Rajkovic, Matthew Serfling, Matthew Souther, Jide Wintoki, Jun Yang (the referee), Adam Yore, and seminar participants at the University of Alabama, Baylor University, the University of Georgia, the Korea Advanced Institute of Science and Technology, the Universita Cattolica del Sacro Cuore in Milan, Italy, and conference participants at the 2016 Korean Association of Business Education Meeting (Best Paper Award), the 2016 Northern Finance Association Annual Meeting, the 2016 Financial Management Association Annual Meeting, the 2016 Southern Finance Association Annual Meeting, the 2017 Eastern Finance Association Annual Meeting (Outstanding Paper in Corporate Finance Award), the 2017 European Finance Association Annual Meeting, the 2019 American Law and Economics Association Annual Meeting, and the 2020 American Finance Association Annual Meeting. We also wish to acknowledge assistance from the University of Alabama for a Summer Excellence in Research Grant.

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