Abstract
How does the complexity in CEO compensation affect firm performance? With unknown consequences, the complexity of executive compensation contracts is rising. In this study, we explore how the complexity of executive compensation relates to ?rm performance. We conceptualize and operationalize the objective constituents of complex compensation contracts and find negative outcomes on both accounting- and marked-based measures of firm performance for CEOs. Based on these findings, we furthermore offer and explore theoretical explanations for the relationship, namely multitasking and cognitive limitations. We link these findings to the top management team (TMT) and suggest that compensation complexity is an important extension for the TMT pay dispersion and behavioral integration literature. We discuss these findings and close with potential research opportunities in the nascent research field of compensation complexity.
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