Compensation, status, and press coverage of managers in the U.S. follow a highly skewed distribution: a small number of 'superstars' enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs. At the same time, they extract more compensation following the award, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak governance, even though the frequency of obtaining superstar status is independent of corporate governance. Our results suggest that the ex-post consequences of media-induced superstar status for shareholders are negative.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14140.
Length: Date of creation: Jun 2008 Date of revision: Handle: RePEc:nbr:nberwo:14140
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Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
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Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999.
"Earnings Management to Exceed Thresholds,"
Journal of Business,
University of Chicago Press, vol. 72(1), pages 1-33, January.
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