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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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    Cited by:

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    2. Vincent Tena, 2023. "The Consequences of Regulating Agency Friction on an Optimal Contract," Post-Print hal-04722609, HAL.
    3. Clement Olalekan Olaniyi & Olaolu Richard Olayeni, 2020. "A new perspective into the relationship between CEO pay and firm performance: evidence from Nigeria’s listed firms," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(2), pages 250-277, December.
    4. Morellec, Erwan & Gryglewicz, Sebastian & Mayer, Simon, 2018. "Agency Conflicts over the Short and Long Run: Short-termism, Long-termism, and Pay-for-Luck," CEPR Discussion Papers 12720, C.E.P.R. Discussion Papers.
    5. Nguyen, Thi Hong Hanh & Ntim, Collins G. & Malagila, John K., 2020. "Women on corporate boards and corporate financial and non-financial performance: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 71(C).
    6. Gryglewicz, Sebastian & Mayer, Simon & Morellec, Erwan, 2020. "Agency conflicts and short- versus long-termism in corporate policies," Journal of Financial Economics, Elsevier, vol. 136(3), pages 718-742.
    7. 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.
    8. Yixi Ning & Jun Yang & Yuan Wang, 2024. "The long-term impact of CEO compensation structure on CEO pay for luck and asymmetry," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 48(3), pages 834-856, September.

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    More about this item

    Keywords

    CEO compensation; VP compensation; Benchmarking; Pay for luck;
    All these keywords.

    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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