Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform

• 成果类型: Article
• 署名作者: Chang, Wonjae; Dambra, Michael; Schonberger, Bryce; Suk, Inho
• 署名单位: City University of Hong Kong; State University of New York (SUNY) System; University at Buffalo, SUNY; University of Colorado System; University of Colorado Boulder; Korea University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12458
• 发表日期: 2023
• 页码: 187-242
• 关键词: say-on-pay; INFORMATION; lead

摘要

Beginning in 2018, U.S. public firms were required to report the ratio of the chief executive officer's (CEO) compensation to their median employee's compensation in the annual proxy statement. Exploiting the staggered reporting of pay ratios, we find little evidence that total CEO compensation changes in response to pay ratio disclosure reform. However, we do find that boards significantly adjust the mix of compensation awarded by reducing the sensitivity of CEO pay to equity price changes, particularly when the CEO is likely to garner media scrutiny, and by reducing reliance on stock-based and other compensation components that are most susceptible to media coverage surrounding the pay ratio disclosure. Firms ultimately disclosing higher pay ratios garner more media coverage around the filing of their proxy statement, and more negative-toned coverage in the subsequent month. Finally, we find evidence that greater pay disparity is associated with greater selling activity by retail investors and more negative say-on-pay votes following pay ratio reform, consistent with a broad set of investors responding to public scrutiny resulting from pay ratio disclosures.