o Time : November 30, Friday 15:00 ~ 16:30 p.m.

o Venue : 9705(The 7th floor seminar room)


The Dynamic Structure of CEO Compensation: An Empirical Study


Abstract

In the traditional agency view, CEO compensation should be closely tied to current firm performance. By contrast, multi-period agency theories recently posit that optimal CEO pay levels can be persistent or even fixed over time. Under the multi-period optimal compensation structures, a CEO''s current performance can be compensated both today and tomorrow, allowing expected future rewards to be efficient substitutes for immediate pay for performance. This paper tests the recent view by using a partial adjustment model of CEO compensation. We find that persistent target pay levels are set upon long-run firm performance and that the deviation of the actual pay level results in near-complete convergence to the target in one year. The findings here support the claim that multi-period agency problems are at the root of CEO compensation arrangements.