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The Role of Defined Benefit Pension Plans in Executive Compensation

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  • Brian Cadman
  • Linda Vincent

Abstract

Although defined benefit (DB) pension plans constitute a significant portion of both annual compensation and firm-related wealth for many CEOs, prior studies of CEO compensation contracts generally exclude these plans from their analyses due to lack of data. Taking advantage of recently increased disclosure requirements, we analyse the role of DB pension plans in these contracts. We find that firms with CEO DB pension plans grant the CEO annual compensation that is larger than predicted by economic determinants. We also find that more powerful CEOs, identified by their extraordinary pension benefits, receive higher total pay in addition to the pension benefits. We find no evidence that CEO pension benefits contribute to the pay-for-performance sensitivity of the annual pay.

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  • 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.
    • Handle: RePEc:taf:euract:v:24:y:2015:i:4:p:779-800
    DOI: 10.1080/09638180.2014.959979
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    Cited by:

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    3. Kabir, Rezaul & Li, Hao & Veld-Merkoulova, Yulia, 2018. "Do managers act opportunistically towards the end of their career?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 218-232.

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