Abstract
I report and analyze a recent “one-size-fits-all” trend in the structure of executive compensation plans. Since 2006, 24% of the variation in the distribution of CEO compensation across pay components — salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites — disappeared. This uniformity might come at the expense of optimal incentives, as increases in pay structure similarity translate into lower shareholder value. Using panel data regressions and plausibly exogenous shocks, I find that institutional investors’ influence, proxy advisors’ recommendations, and expanded compensation disclosure are salient drivers of this standardization. The findings highlight an unintended consequence of recent regulations enhancing shareholders’ participation and expanding compensation disclosure.
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