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Are Energy Executives Rewarded For Luck?

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  • Lucas W. Davis
  • Catherine Hausman

Abstract

In this paper, we examine executive compensation data from 78 major U.S. oil and gas companies over a 24-year period. Perhaps in no other industry are the fortunes of so many executives so dependent on a single global commodity price. We find that a 10% increase in oil prices is associated with a 2% increase in executive compensation. This oil price effect holds for both CEOs and non-CEOs and separately for several different individual components of compensation, including bonuses. We find that the oil price effect is larger in companies with more insiders on the board, and asymmetric, with executive compensation rising with increasing oil prices more than it falls with decreasing oil prices. We then discuss potential mechanisms drawn from the broader existing literature on executive compensation.

Suggested Citation

  • Lucas W. Davis & Catherine Hausman, 2018. "Are Energy Executives Rewarded For Luck?," NBER Working Papers 25391, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25391
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    2. 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.
    3. Michaelides, Panayotis G. & Tsionas, Efthymios G. & Konstantakis, Konstantinos N. & Xidonas, Panos, 2019. "The impact of market competition on CEO salary in the US energy sector1," Energy Policy, Elsevier, vol. 132(C), pages 32-37.
    4. Yensen Ni, 2024. "Navigating Energy and Financial Markets: A Review of Technical Analysis Used and Further Investigation from Various Perspectives," Energies, MDPI, vol. 17(12), pages 1-22, June.
    5. Shang, Xiaodan & Luo, Chuanjian & Wen, Qian, 2020. "Do Chinese executives reward for luck?," Economic Modelling, Elsevier, vol. 92(C), pages 318-325.
    6. Yi Han & Yiming Liu & George Loewenstein, 2023. "Confusing Context with Character: Correspondence Bias in Economic Interactions," Management Science, INFORMS, vol. 69(2), pages 1070-1091, February.
    7. Amore, Mario Daniele & Schwenen, Sebastian, 2020. "The Value of Luck in the Labor Market for CEOs," CEPR Discussion Papers 14839, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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