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CEO incentives and the health of defined benefit pension plans

Author

Listed:
  • Joy Begley

    (University of British Columbia)

  • Sandra Chamberlain

    (University of British Columbia)

  • Shuo Yang

    (Hong Kong Polytechnic University)

  • Jenny Li Zhang

    (University of British Columbia)

Abstract

We examine the relation between CEO pay-related wealth and the funding levels, and freezing decisions, of defined benefit pension plans. Results show that higher funding levels occur when CEOs are most endowed in employee pension plans, but that spillover endowments in supplemental executive plans coincide with the lowest funding levels. CEO equity-wealth correlates with funding health in between the extremes. Further, “hard freezes” of employee plans are less likely, the larger the CEO’s total pension interest (in executive and employee plans together). This suggests that CEOs fear repercussions to their own pension plan when employee plans are frozen.

Suggested Citation

  • Joy Begley & Sandra Chamberlain & Shuo Yang & Jenny Li Zhang, 2015. "CEO incentives and the health of defined benefit pension plans," Review of Accounting Studies, Springer, vol. 20(3), pages 1013-1058, September.
    • Handle: RePEc:spr:reaccs:v:20:y:2015:i:3:d:10.1007_s11142-015-9332-0
    DOI: 10.1007/s11142-015-9332-0
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    Keywords

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    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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