Monday, June 15, 2015

Chu et al.: Evidence for the CYA Theory of Compensation Consultants


"Do Compensation Consultants Enable Higher CEO Pay? New Evidence from Recent Disclosure Rule Changes" Free Download

JENNY CHUUniversity of Cambridge - Judge Business School
JONATHAN FAASSEUniversity of Cambridge - Judge Business School
P. RAGHAVENDRA RAUUniversity of Cambridge

In July 2009, the SEC announced additional disclosure rules requiring firms that purchase other services from their compensation consultants to disclose fees paid for both compensation consulting and other services. ... After the rule change, client firms that switched to specialist consultants paid their chief executive officers (CEOs) 7.4% more in median total compensation than a matched sample of firms that remained with multi-service consultants. Compensation consultants retained solely by the board are associated with 15.1% lower median pay levels than a propensity-score matched sample of firms with management-retained consultants....

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