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Public opinion and executive compensation

  • Kuhnen, Camelia M.
  • Niessen, Alexandra

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.

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Paper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 08-09 [rev.].

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Date of creation: 2010
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Handle: RePEc:zbw:cfrwps:0809r
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