Complexity of CEO compensation packages☆

• 成果类型: Article
• 署名作者: Albuquerque, Ana; Carter, Mary Ellen; Guo, Zhe (Michael); Lynch, Luann J.
• 署名单位: Boston University; Boston College; Fordham University; University of Virginia
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101709
• 发表日期: 2025
• 关键词: investment opportunity set; corporate governance; moral hazard; incentive contracts; control-systems; performance; OWNERSHIP; firm; disclosure; earnings

摘要

This paper examines complexity in CEO compensation contracts. We develop a measure of compensation complexity and provide empirical evidence that complexity has increased substantially over time. We document that complexity results not only from factors reflecting efficient contracting, but also from external pressures from compensation consultants, institutional investors, proxy advisors, and attempts to benchmark to peers, with these external factors having greater impact in more recent years. Examining consequences of contract complexity, we find an association with lower future firm performance that is related to the influence of external factors on compensation design. We further find this relation is partially mitigated when a contract's performance metrics are more highly correlated, consistent with information processing costs hampering decision-making. Collectively, these findings confirm concerns raised by investors and the media regarding compensation complexity and can inform boards in their design of CEO pay packages.