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International work experience and compensation: Is more always better for CFOs?

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  • Schmid, Stefan
  • Altfeld, Frederic

Abstract

The CFO is increasingly considered the second most important executive in the firm after the CEO. Still, little is known about the factors that determine CFOs' compensation. Recently, it has often been claimed that, in MNCs, CFOs should have international work experience. But is a CFO's international work experience also reflected in his or her compensation? We combine human capital and social capital perspectives to account for both the upside and the downside of international work experience. We suggest that working abroad provides CFOs with valuable knowledge and skills which increase compensation; however, staying abroad for too long has an adverse effect due to losses in social network ties. We thus propose an inverted U-shaped relationship between CFOs' international work experience and their compensation. Furthermore, we suggest that this relationship is contingent on the characteristics of the CEO. In testing our hypotheses on a sample of the largest MNCs in Europe, we find support for the proposed relationships. Our study contributes to the literature on top management characteristics and executive compensation, specifically by providing a comprehensive understanding of how and when international work experience pays off for CFOs.

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  • Schmid, Stefan & Altfeld, Frederic, 2018. "International work experience and compensation: Is more always better for CFOs?," European Management Journal, Elsevier, vol. 36(4), pages 530-543.
    • Handle: RePEc:eee:eurman:v:36:y:2018:i:4:p:530-543
    DOI: 10.1016/j.emj.2017.11.001
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    1. Schmid, Stefan & Mitterreiter, Simon, 2021. "Understanding top managers’ careers: How does career variety impact tenure on the board?," European Management Journal, Elsevier, vol. 39(5), pages 617-632.
    2. Stefan Schmid & Simon Mitterreiter, 2020. "International Top Managers on Corporate Boards: Dissimilarity and Tenure," Management International Review, Springer, vol. 60(5), pages 787-825, October.
    3. Schmid, Stefan & Altfeld, Frederic & Dauth, Tobias, 2018. "Americanization as a driver of CEO pay in Europe: The moderating role of CEO power," Journal of World Business, Elsevier, vol. 53(4), pages 433-451.
    4. Ilya R. P. Cuypers & Charmi Patel & Gokhan Ertug & Jiatao Li & Youtha Cuypers, 2022. "Top management teams in international business research: A review and suggestions for future research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 481-515, April.
    5. Stefan Schmid & Sebastian Baldermann, 2021. "CEOs’ International Work Experience and Compensation," Management International Review, Springer, vol. 61(3), pages 313-364, June.

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