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Are Energy Executives Rewarded for Luck?

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  • Lucas W. Davis and Catherine Hausman

Abstract

In this paper, we examine executive compensation data from 78 major U.S. oil and gas companies over a 24-year period. Perhaps in no other industry are the fortunes of so many executives so dependent on a single global commodity price. We find that a 10% increase in oil prices is associated with a 2% increase in executive compensation. This oil price effect holds for both CEOs and non-CEOs and separately for several different individual components of compensation, including bonuses. We find that the oil price effect is larger in companies with more insiders on the board, and asymmetric, with executive compensation rising with increasing oil prices more than it falls with decreasing oil prices. We then discuss potential mechanisms drawn from the broader existing literature on executive compensation.

Suggested Citation

  • Lucas W. Davis and Catherine Hausman, 2020. "Are Energy Executives Rewarded for Luck?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6), pages 157-180.
  • Handle: RePEc:aen:journl:ej41-6-hausman
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    Cited by:

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    3. Michaelides, Panayotis G. & Tsionas, Efthymios G. & Konstantakis, Konstantinos N. & Xidonas, Panos, 2019. "The impact of market competition on CEO salary in the US energy sector1," Energy Policy, Elsevier, vol. 132(C), pages 32-37.

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