Are Incentive Contracts Rigged by Powerful CEOs?

• 成果类型: Article
• 署名作者: Morse, Adair; Nanda, Vikram; Seru, Amit
• 署名单位: University of Chicago; University System of Georgia; Georgia Institute of Technology
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2011.01687.x
• 发表日期: 2011
• 页码: 1779-1821
• 关键词: executive-compensation; performance; OWNERSHIP; DIRECTORS; determinants; COSTS; luck

摘要

We argue that some powerful CEOs induce boards to shift the weight on performance measures toward the better performing measures, thereby rigging incentive pay. A simple model formalizes this intuition and gives an explicit structural form on the rigged incentive portion of CEO wage function. Using U.S. data, we find support for the model's predictions: rigging accounts for at least 10% of the compensation to performance sensitivity and it increases with CEO human capital and firm volatility. Moreover, a firm with rigged incentive pay that is one standard deviation above the mean faces a subsequent decrease of 4.8% in firm value and 7.5% in operating return on assets.