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Executive pensions, disclosure quality, and rent extraction

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  • Kalyta, Paul
  • Magnan, Michel

Abstract

We argue that vague disclosure of supplemental executive retirement plans (SERPs) may impede effective shareholder monitoring over this compensation form. Hence, CEOs with power over the board may view SERP benefits as an attractive mechanism to increase their own pay, thereby extracting rents. Our results provide empirical support of the hypothesis. Many of the variables proxying for CEO power are significant in explaining the incidence and magnitude of CEO SERP benefits. In contrast, we find little association between CEO power and cash pay, a well disclosed and monitored compensation form. The results indicate that rent extraction depends on the quality of compensation disclosure.

Suggested Citation

  • Kalyta, Paul & Magnan, Michel, 2008. "Executive pensions, disclosure quality, and rent extraction," Journal of Accounting and Public Policy, Elsevier, vol. 27(2), pages 133-166.
    • Handle: RePEc:eee:jappol:v:27:y:2008:i:2:p:133-166
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    Cited by:

    1. Hadani, Michael & Dahan, Nicolas M. & Doh, Jonathan P., 2015. "The CEO as chief political officer: Managerial discretion and corporate political activity," Journal of Business Research, Elsevier, vol. 68(11), pages 2330-2337.
    2. Brian Cadman & Linda Vincent, 2015. "The Role of Defined Benefit Pension Plans in Executive Compensation," European Accounting Review, Taylor & Francis Journals, vol. 24(4), pages 779-800, December.
    3. Hill, Mary S. & Lopez, Thomas J. & Reitenga, Austin L., 2016. "CEO excess compensation: The impact of firm size and managerial power," Advances in accounting, Elsevier, vol. 33(C), pages 35-46.
    4. James, Hui L. & Benson, Bradley W. & Park, Jung Chul, 2020. "CEO fixed effects and inside debt compensation," Journal of Business Research, Elsevier, vol. 117(C), pages 71-86.
    5. Santanu Mitra & Hakjoon Song & Sang Mook Lee & Shin Hyoung Kwon, 2020. "CEO tenure and audit pricing," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 427-459, August.
    6. Plöckinger, Martin & Aschauer, Ewald & Hiebl, Martin R.W. & Rohatschek, Roman, 2016. "The influence of individual executives on corporate financial reporting: A review and outlook from the perspective of upper echelons theory," Journal of Accounting Literature, Elsevier, vol. 37(C), pages 55-75.
    7. Denton Collins & Gary Fleischman & Stacey Kaden & Juan Manuel Sanchez, 2018. "How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation," Journal of Business Ethics, Springer, vol. 153(2), pages 591-613, December.

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