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Asymmetric benchmarking of pay in firms

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  • Francis, Bill
  • Hasan, Iftekhar
  • John, Kose
  • Sharma, Zenu

Abstract

This paper examines whether asymmetric benchmarking of pay exists for vice presidents (VPs). Using ExecuComp data for 1992–2007, we find that companies reward VPs for good luck but do not penalize them for bad luck. However, asymmetric benchmarking of VP pay is mitigated by governance, CEO power, gender, and industry factors. The presence of asymmetric benchmarking of pay could suggest that managers are involved in skimming, or it could mean that firms insulate managers from poor firm performance to prevent them from accessing outside opportunities. We find that unlike CEOs, asymmetric benchmarking of pay for VPs is not consistent with the skimming hypothesis.

Suggested Citation

  • Francis, Bill & Hasan, Iftekhar & John, Kose & Sharma, Zenu, 2013. "Asymmetric benchmarking of pay in firms," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 39-53.
  • Handle: RePEc:eee:corfin:v:23:y:2013:i:c:p:39-53
    DOI: 10.1016/j.jcorpfin.2013.07.004
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    References listed on IDEAS

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    Cited by:

    1. Campbell, T. Colin & Thompson, Mary Elizabeth, 2015. "Why are CEOs paid for good luck? An empirical comparison of explanations for pay-for-luck asymmetry," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 247-264.

    More about this item

    Keywords

    CEO compensation; VP compensation; Benchmarking; Pay for luck;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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