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Public opinion and executive compensation

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  • Kuhnen, Camelia M.
  • Niessen, Alexandra

Abstract

We inquire whether public opinion influences executive compensation. During 1992-2008 the negativity of press coverage of CEO pay varied significantly, with stock options being the most discussed pay component. We find that after more negative press coverage of CEO pay firms reduce option grants and increase other compensation including stock awards, overall reducing pay-to-performance sensitivity. The reduction in option pay after increased press negativity is more pronounced when firms and CEOs have stronger reputation concerns. Our within-firm, within-year identification shows the results cannot be explained by annual changes in accounting rules regarding executive compensation, stock market conditions, or pay mean-reversion.

Suggested Citation

  • Kuhnen, Camelia M. & Niessen, Alexandra, 2010. "Public opinion and executive compensation," CFR Working Papers 08-09 [rev.], University of Cologne, Centre for Financial Research (CFR).
    • Handle: RePEc:zbw:cfrwps:0809r
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    More about this item

    Keywords

    executive compensation; public opinion; social norms; media coverage;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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