CEOs\u2019 International Work Experience and Compensation

Stefan Schmid,Sebastian Baldermann

doi:10.1007/s11575-021-00444-z

Abstract

In this paper, we study the effect a CEO’s international work experience has on his or her compensation. By combining human capital theory with a resource dependence and a resource-based perspective, we argue that international work experience translates into higher pay. We also suggest that international work experience comprises several dimensions that affect CEO compensation: duration, timing and breadth of stays abroad. With data from Europe’s largest stock market firms, we provide evidence that the longer the international work experiences and the more numerous they are, the higher a CEO’s compensation. While, based on our theoretical arguments, we expect to find that later international work experiences pay off for CEOs, our empirical analysis shows that earlier international work experiences are particularly valuable in terms of compensation. In addition, our data support the argument that maturity allows a CEO to take advantage of the skills, knowledge and competencies obtained via international experience—and to receive a higher payoff. With our study, we improve the understanding of how different facets of a CEO’s background shape executive remuneration.

Highlights

Multinational corporations (MNCs) need top managers who are able to navigate in diverse environments
The robustness check confirms and adds to the results of our main analysis, so it can be concluded that the cultural distance of the countries in which a CEO has stayed is associated with the value of the respective international work experience
Our results indicate that in line with increasing cultural distance, long, early and widespread international work experiences may become more valuable

Summary

Introduction

Multinational corporations (MNCs) need top managers who are able to navigate in diverse environments. In this respect, we can expect that a top manager’s international experience affects his or her individual development, and his or her compensation.

Objectives

Methods

Results

Discussion

Conclusion