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Evidence on compensation consultant fees and CEO pay

Author

Listed:
  • Matthew Grosse
  • Nelson Ma

    (Accounting Discipline Group, University of Technology Sydney, Broadway, NSW, Australia)

  • Tom Scott

    (Accounting Department, Auckland University of Technology, New Zealand)

Abstract

Regulators and previous research have expressed concern about the effect of compensation consultants on CEO pay. We use the Australian setting, where fees for both compensation and other consulting services supplied by compensation consultants are mandated disclosures for all firms, to provide evidence on the role of compensation consultants on CEO pay. We find that the use of compensation consultants or remuneration advisers, fees for compensation services and positive residual compensation service fees are associated with higher CEO pay. In contrast, both the provision and the proportion of fees from other services provided by compensation consultants are not. Furthermore, these positive associations are not observed when a Big 4 accounting firm is the compensation consultant. JEL Classification: G38, M12, M48, M52

Suggested Citation

  • Matthew Grosse & Nelson Ma & Tom Scott, 2020. "Evidence on compensation consultant fees and CEO pay," Australian Journal of Management, Australian School of Business, vol. 45(1), pages 15-44, February.
    • Handle: RePEc:sae:ausman:v:45:y:2020:i:1:p:15-44
    DOI: 10.1177/0312896219837999
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    References listed on IDEAS

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    More about this item

    Keywords

    CEO pay; compensation consultants; consulting fees; executive compensation; remuneration adviser;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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