Is Disclosure an Effective Cleansing Mechanism? The Dynamics of Compensation Peer Benchmarking

• 成果类型: Article
• 署名作者: Faulkender, Michael; Yang, Jun
• 署名单位: University System of Maryland; University of Maryland College Park; Indiana University System; Indiana University Bloomington; IU Kelley School of Business
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs115
• 发表日期: 2013
• 页码: 806
• 关键词: ceo pay; executive-compensation; corporate governance; managerial power; INFORMATION; incentives; MARKET; performance; DIRECTORS; boards

摘要

Firms routinely justify CEO compensation by benchmarking against companies with highly paid CEOs. We examine whether the 2006 regulatory requirement of disclosing compensation peers mitigated firms' opportunistic peer selection activities. We find that strategic peer benchmarking did not disappear after enhanced disclosure. In fact, it intensified at firms with low institutional ownership, low director ownership, low CEO ownership, busy boards, large boards, and non-intensive monitoring boards, and at firms with shareholders complaining about compensation practices. The effect is also stronger at firms with new CEOs. These findings call into question whether disclosure regulation can remedy potential problems in compensation practices.