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Executive pay and "independent" compensation consultants

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  • Murphy, Kevin J.
  • Sandino, Tatiana
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    Abstract

    Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to "cross-sell" services and to secure "repeat business." We find evidence in both the US and Canada that CEO pay is higher in companies where the consultant provides other services, and that pay is higher in Canadian firms when the fees paid to consultants for other services are large relative to the fees for executive-compensation services. Contrary to expectations, we find that pay is higher in US firms where the consultant works for the board rather than for management.

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    File URL: http://www.sciencedirect.com/science/article/B6V87-4XX15N5-1/2/75175518079751e728c896e10ae28fa8
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 49 (2010)
    Issue (Month): 3 (April)
    Pages: 247-262

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    Handle: RePEc:eee:jaecon:v:49:y:2010:i:3:p:247-262

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    Web page: http://www.elsevier.com/locate/jae

    Related research

    Keywords: Executive compensation Disclosure Corporate governance Board of directors Compensation consultants;

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    1. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    2. William R. Kinney & Zoe-Vonna Palmrose & Susan Scholz, 2004. "Auditor Independence, Non-Audit Services, and Restatements: Was the U.S. Government Right?," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 561-588, 06.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    4. Anup Agrawal & Mark A. Chen, 2008. "Do Analyst Conflicts Matter? Evidence from Stock Recommendations," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 503-537, 08.
    5. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
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