Session 331

CEO Compensation: What we Know, What we Need to Study

Track O

Date: Monday, September 22, 2014

 

Time: 14:45 – 16:00

Paper

Room: Monaco


Session Chair:

  • Kalin Kolev, Marquette University

Title: CEO Option Wealth Reference Point and Risk-Taking: Moderating Effects of Slack and Bankruptcy Risk

Authors

  • Elizabeth Lim, Georgia State University

Abstract: The behavioral agency model has assumed CEO current wealth influences firm risk-taking without considering the role of pay reference point. We advance this theory by investigating CEO current and future wealth relative to reference point including slack and bankruptcy risk as contingency factors affecting risk-taking. We propose risk-taking increases in the loss domain for both wealth types as CEOs seek to reach the benchmark. CEOs protecting their current wealth in the gain domain are risk-averse, but those with future wealth are risk-seeking due to lower sensitivity to losses. In the gain domain slack positively moderates both wealth types and risk-taking. In the loss domain bankruptcy risk may positively or negatively moderate CEO wealth depending on its type. We largely found support for our theory.

Title: CEOs Win and Shareholders Lose: A Joint Agency-Justice Perspective on CEO Excess Returns

Authors

  • Kalin Kolev, Marquette University
  • Robert Wiseman, Michigan State University
  • Luis Gomez-Mejia, Notre Dame University

Abstract: This study provides a novel interpretation of CEO pay from a deservingness perspective by drawing on both agency and organizational justice models. We compare the returns realized by CEOs to those realized by shareholders, to suggest that CEO returns in excess of shareholder returns after controlling for contributions to the CEO’s reservation wages are an indication of failure in distributive justice between CEOs and investors. Furthermore, framing CEO pay as an outcome of a bargaining process between CEOs and boards of directors and utilizing a procedural justice lens we outline several factors that affect this bargaining by violating norms of procedural justice. In summary, the existence of weak procedural justice in the CEO-board relationships helps explain violations of distributive justice in CEO pay.

Title: Institutional Ownership and Covert Opportunism: The Case of Stock Option Backdating

Authors

  • Curtis Wesley, University of Houston
  • Joseph Coombs, Virginia Commonwealth University
  • David Sirmon, University of Washington
  • Justin Webb, University of North Carolina at Charlotte

Abstract: We argue institutional owners spend their limited time and attention monitoring more common forms of opportunistic actions thereby inadvertently providing opportunities for CEOs to engage in more covert opportunistic actions. We suggest that institutional investors with short investment horizons are less likely to identify covert opportunism while institutional owners with longer investment horizons misinterpret the signs with the assistance of the opportunistic executive. We classify investors as dedicated, quasi-indexers, and transient investors based on their investment time horizon (Bushee, 2001). We find high levels of institutional ownership are associated with options backdating in firms as are institutional investors with long-term ownership interests yet passive investment strategies (quasi-indexers). Our results provide evidence that passive investing by institutional owners provides opportunity for more covert forms of managerial opportunism.

Title: The Impact of Firm Reputation and CEO Compensation on Acquisition Activity

Authors

  • Daniel Gamache, University of Georgia
  • Adam Steinbach, University of South Carolina
  • Cynthia E Devers, Texas A&M University
  • Sarah Otner, Henley Business School, University of Reading

Abstract: Although we are beginning to develop a deeper understanding of how pay influences acquisition investment we still know very little about other influences that may present different forms of downside risk for acquiring CEOs. We address this issue by considering whether firm reputation influences CEOs’ acquisition behavior. We argue and find that high reputation firms engage in greater acquisition investment than low reputation firms. We also hypothesize an interaction effect finding that high levels of CEO compensation combined with a high firm reputation result in reduction in acquisition investment. Following prior research we capture reputation based on Fortune’s Most Admired Companies list and Harris Interactive’s Corporate Reputation Index. We are currently conducting supplemental analysis utilizing Ravenpack’s News Analytics dataset.

All Sessions in Track O...

Sun: 08:00 – 09:15
Session 311: The Power of Power: The Role of Power and Politics in Strategy Processes
Session 386: Entrepreneurial Corporate Governance
Sun: 11:15 – 12:30
Session 476: The Dark Side of Strategic Leadership and Governance
Sun: 15:45 – 17:00
Session 435: What Happens After the CEO Has (Been) Gone?
Sun: 17:15 – 18:30
Session 611: Strategic Leadership and Governance IG Business Meeting
Mon: 08:00 – 09:15
Session 335: Internationalization and Strategic Decisions
Session 458: Those at the Top Matter!
Mon: 11:00 – 12:15
Session 336: CEO Roles, Frames, and Traits
Mon: 14:45 – 16:00
Session 331: CEO Compensation: What we Know, What we Need to Study
Mon: 16:30 – 17:45
Session 337: Power at the Top - The Influence of Directors
Session 411: Ownership and Governance
Tue: 08:00 – 09:15
Session 428: Managing External Dependencies
Session 467: Putting Pressure on the CEO
Tue: 11:00 – 12:15
Session 465: The Importance of Corporate Governance
Tue: 15:30 – 16:45
Session 429: Director Selection and Influence
Tue: 17:15 – 18:30
Session 431: Agents, Principals, and Owners
Session 432: Upper Echelons Revisited


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