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Executive compensation, compensation consultants, and shopping for opinion: Evidence from the United Kingdom

By Lisa Goh and Aditi Gupta

Abstract

This paper builds on prior research on compensation consultants and executive pay, which finds widespread use of compensation consultants and higher levels of pay and proportions of equity based-pay in firms that employ consultants. Using a sample of FTSE 350 firms from 2002-2008, we provide new evidence that chief executive officers (CEOs) and executives of firms that switch their main consultant receive higher salary increments in the year of the switch (both absolute and adjusted for median peer levels) and a less risky compensation package, through a higher proportion of bonus and a lower proportion of equity pay. We do not find that executives of firms that increase their number of consultants have higher increases in compensation than nonincreasing firms. Our results provide some evidence that companies successfully engage in opinion-shopping between consultants for more favorable compensation packages for CEOs and executives

Topics: HF5601 Accounting
Publisher: SAGE Publications on behalf of the Vincent C. Ross Institute of Accounting Research, The Leonard N. Stern Business School
Year: 2010
DOI identifier: 10.1177/0148558X1002500407
OAI identifier: oai:eprints.lse.ac.uk:33522
Provided by: LSE Research Online
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