Higher CEO Research Articles

Peer benchmarking and CEO compensation: An examination of the community structure of the compensation peer network

AbstractResearch Question/IssueThe increase in executive pay has been attracting attention to the practice of peer benchmarking, which is commonly used to determine CEO compensation. Using a network approach, we construct and analyze the compensation peer network and examine how the structure of the network influences CEO pay.Research Findings/InsightsUsing data on public firms in the period between 2006 and 2020, we find that the peer network exhibits strong community structure and that bridging across communities influences CEO pay. Specifically, CEO pay increases by approximately $10 million as the number of bridging ties increases from 30 to 100, which indicates that obfuscation can result in inflated CEO pay and supports the managerial power perspective.Theoretical/Academic ImplicationsWe empirically distinguish the predicted effect of peer benchmarking on CEO pay as outlined in the market for executive talent and the managerial power perspectives. We show that firms may avoid scrutiny and offer high CEO compensation when they either have a very small number of targeted bridging ties or a very large number of diffused, nontargeted bridging ties in the peer network.Practitioner/Policy ImplicationsThe intent of peer benchmarking was to make CEO compensation practices more transparent, legitimate, and functional; however, our findings indicate that these intentions have not been fully realized and instead benchmarking can be used to inflate CEO pay while avoiding stakeholder scrutiny through obfuscation. These insights provide an opportunity to policy makers to be more effective in encouraging additional transparency and stronger justification for boards' choice of peers.

High efficient and stable photocatalyst CeO2/ZnO for tetracycline degradation

Three kinds of CeO2/ZnO nanocomposites were successfully prepared by the hydrothermal method. The morphology and composition tests show that the CeO2 cubic nanoparticles with a side length of about 10 nm are uniformly loaded on the irregular ZnO nanosheets. Under ultraviolet light irradiation, CeO2/ZnO (1:5) has the best photocatalytic performance and the degradation efficiency of tetracycline (TC) is 97.2% within 140 min. In addition, with CeO2/ZnO (1:5) as photocatalyst, the degradation rate of TC only decreased by 1.3% after 6 cycles, indicating that CeO2/ZnO (1:5) has excellent photocatalytic stability. Therefore, the CeO2/ZnO (1:5) nanocomposite has a bright future for industrial application in wastewater treatment.

The moderating role of CEO sustainability reporting style in the relationship between sustainability performance, sustainability reporting, and cost of equity

This paper explores the role of individual managers in the relationship between sustainability performance, sustainability reporting, and cost of equity. Based on prior research showing that both sustainability performance and reporting reduce the risk premium, this paper contributes to the literature by acknowledging that the true motives behind a manager’s corporate sustainability engagement are not apparent to investors. Thus, investors need to rely on further information to assess the relationship between sustainability performance and risk. We argue that CEOs’ values and preferences drive their decisions regarding sustainability activities. Thus, their fixed effect on sustainability reporting conveys a signal to investors about the motives behind corporate sustainability engagement and the extent of reporting. In the first step of our empirical analysis, we document that a CEO’s specific reporting style indeed has significant statistical power in explaining a company’s level of sustainability reporting. In the second step, we find that improved sustainability performance is associated with increased cost of equity when the CEO exerts a strong personal influence on sustainability reporting. However, cost of equity declines if the CEO’s influence on the reporting of improved sustainability performance is low. Our results are consistent with the argument that investors interpret CEO’s fixed-effect on sustainability reporting as a signal. That is, for a high CEO fixed-effect, increases in sustainability engagement are conflated with the CEO's self-interested values. In further tests, we show that the signal seems to be particularly important for normative sustainability activities (vs. legal sustainability activities).

Executive Compensation and Firm Performance Relationship

The relationship between executive compensation and firm performance is well documented in the existing literature. However, in the case of Asia Pacific firms, the least attention is paid while investigating this relationship. This study examines the relationship between executive compensation and firm performance in the Asia Pacific firms throughout 2007–2019. We use the total salary paid to chief executive officers and equivalent, the total compensation paid to the CEO, and the equivalent and total salaries and bonuses paid to the CEO and equivalent as a measure of executive compensation. For the firm performance, both accounting measure (ROA) and market measure Tobin’s [Formula: see text] (TQ), and various control variables were used. We found that a firm performance has a positive relationship with total compensation paid to CEO and total salaries and bonuses paid to the CEO. Our results support the agency theory by confirming that higher CEO compensation will lead towards higher firm performance by motivating executives to maximize shareholder benefits. However, the total salary does not have any significant relationship. The overall result of the study indicates that the results of the Asia Pacific regions complement the results obtained in another part of the developed world. The results are supported by the social comparison theory. The study has a practical implication for policymakers, business owners, shareholders, and executives by suggesting aligning their business strategies based on compensation parameters for achieving the best firm performance.

Management connection and firm performance: Evidence from Global Financial Crisis

This study revisits the relationship between the connection CEOs develop with other top executives through appointment decisions and firm performance during the 2008–2009 financial crisis. Contrary to the conventional wisdom that less CEO-independent management team harms firm performance, I document a positive association between management connection and crisis-period stock returns. This baseline finding is robust to various identification strategies with alternative measures of management connection, alternative samples, and placebo tests. Further analyses reveal that the relationship is more pronounced in firms that face more information uncertainty and complex business structure, as well as those with long-connected management teams and high CEO ownership. The evidence suggests that management connection in creating team homogeneity facilitates faster and more decisive actions, which benefit firm performance amid the financial crisis.

Why Do Large Positive Non-GAAP Earnings Adjustments Predict Abnormally High CEO Pay?

ABSTRACTCEOs of S&P 500 firms that report high non-GAAP earnings relative to GAAP earnings receive substantial unexplained pay. Crucially, this result remains even after controlling for the level of non-GAAP and GAAP earnings. These firms are relatively poor performers (i.e., low GAAP earnings and stock returns) and have less powerful CEOs, consistent with non-GAAP earnings being used as justification when high executive pay is more likely to cause outrage. Additionally, despite the lower GAAP and return performance, these firms are more likely to beat the earnings targets specified in their compensation plans, which likely increases investors' perceptions of core operating earnings and reduces outrage. Indeed, these firms face less dissent from shareholders and proxy advisors, and no additional media scrutiny. Our evidence suggests that the fraction of CEO pay that seems attributable to opportunistic non-GAAP reporting, while limited, is economically meaningful.JEL Classifications: G14; G34; G38; M12; M41.

Are board monitoring and CEO incentives substitutes for each other? Evidence from Australian market reaction to acquisition announcements

We examine the hypotheses that board monitoring and CEO stock incentives are effective mechanisms and substitutes for each other using the Australian acquisition market as an experimental field. The results confirm that Australian firms use board monitoring and CEO incentives as substitutes for each other, but the effects of these mechanisms on the acquirers' return do not support the notion that each can substitute for the role of the other. We find the market reaction to acquisitions made by acquirers with low monitoring-high CEO incentives is significantly higher than the reaction to those made by acquirers with high monitoring-low CEO incentives. Further analyses confirm that monitoring level does not make a difference when the CEO is granted high or low incentives but reduces the gain from M&As when used as a substitute for CEO incentives. The latter, if high enough, effectively aligns the managers' interests with those of the shareholders. Our findings hold when we control for other variables and possible endogeneity in the main variables of interest. These results suggest that Australian firms, on average, focus on the board's monitoring role at the expense of its advisory role, a setting that reduces firm value if used as a substitute for CEO incentives.

CEO option incentives and corporate share repurchases

In this paper, we study the effects of CEOs option incentives on firms' payout and investment policies. On the company's payout side, we find strong evidence that high CEO option sensitivity to stock prices causes more share buybacks and fewer cash dividends. Furthermore, the impact of option incentives on share repurchases is more pronounced when the stock is undervalued. On the investment side, we find that higher exercisable option-delta CEOs direct fewer resources to R&D investments and employment. We use instrument variables two-stage least square regressions and simultaneous system equations regressions to address remaining endogeneity concerns and establish causality. Further analyses reveal that firms in the top exercisable option-delta quintile experience deterioration in performance following buybacks, suggesting that CEOs' repurchasing decisions are significantly influenced by stock price concerns and that they may not act in the best interest of shareholders in the long-term.

The impact of relative CEO compensation on not-for-profit contributions

PurposeThe authors extend research suggesting that external funders reduce their contributions to not-for-profit (NFP) organizations in response to media-reported CEO compensation levels.Design/methodology/approachEmploying a maximum archival sample of 44,807 observations from US Form 990s, the authors comprehensively assess the extent that high relative NFP CEO compensation is associated with decreases in future contributions.FindingsThe authors find that donors and grantors react negatively to high relative CEO compensation but do not react adversely to high absolute executive compensation. Contributors seem to take issue with CEO compensation when they perceive it absorbs a relatively large portion of the organizations’ total expenses, which may hinder the NFP’s mission. Additional findings suggest that excess cash held by the NFP significantly exacerbates the negative baseline relationship between future contributions and high relative CEO compensation. Finally, both individual donors and professional grantors are sensitive to cash NFP CEO compensation levels, but grantors are more sensitive to CEO noncash compensation.Research limitations/implicationsThe authors’ data are focused on larger NFP organizations, so this limits the generalizability of the study. Furthermore, survivorship bias potentially influences their time-series investigations because a current year large-scale decrease in funding due to high relative CEO compensation may cause some NFP firms to drop out of the sample the following year due to significant funding reductions.Originality/valueThe study makes three noteworthy contributions to the literature. First, the study documents that the negative association between high relative CEO compensation levels and future donor and grantor contributions is much more widespread than previous literature suggested. Second, the authors document that high relative CEO compensation levels that trigger reductions in future contributions are significantly exacerbated by excess cash held by the NFP. Finally, the authors find that more sophisticated grantors are more sensitive to noncash CEO compensation levels as compared with donors.

Executive and Organizational Determinants of CEO Sociopolitical Activism

The recent rise of CEO sociopolitical activism---CEOs’ public expression of opinion on controversial sociopolitical issues of the day---is attracting scholarly attention as researchers seek to understand the phenomenon and its implications for strategic choices and firm performance. CEO sociopolitical activism can be a ‘double-edged sword’; while it may garner the praises of increasingly vocal stakeholders (e.g., employees, customers, investors), it could potentially backfire by alienating others, especially if the CEO’s position on these issues is inconsistent with these stakeholders. Despite the inherent risk, CEO sociopolitical activism is on the rise. This begs the question: why do some CEOs become sociopolitical activists while others remain on the ‘sidelines’? This study seeks to address this question by exploring the executive and organizational determinants of CEO sociopolitical activism. Drawing from the status and reputation literatures, we explore the effect of CEO power, CEO celebrity status, firm reputation, and firm political activity as predictors of CEO sociopolitical activism. In doing so, we focus on the “bully pulpit” explanation by arguing that high status CEOs are more likely to use their professional position and visibility to advocate for or against controversial sociopolitical issues. Our analysis of data from 178 matched pair S&P 500 firms from 2008-2017 provides support for our predictions. Implications for research and practice are discussed.

New CEO Succession Origin and Strategic Change in Turnaround Situations: A Relational Perspective

We study the effect of new CEO succession origin on strategic change in firms facing turnaround situations. Taking a ‘relational perspective’ of CEO succession, we argue that the degree to which outside CEO succession associates with strategic change depends on the relational network between the outside CEO and key incumbent executives prior to succession. Using data from 108 companies with new CEOs in turnaround situations between 1993 and 2015, we find that high CEO outsiderness has a negative effect on strategic change in firms facing turnaround conditions – while this effect is weaker in the later years of the new CEO’s tenure. We further find that outsider CEOs with more connected intra-TMT network brings a higher degree of strategic change to the firm early after succession. Overall, our paper contributes to the extant literature on CEO succession by underscoring the important role of the relational CEO-TMT interface when a new CEO takes charge with the mandate to bring about strategic change (i.e., in turnaround conditions).

CEO organizational identification and firm cash holdings

As the decision-makers and implementers of a firm’s financial strategy, executives play a critical role in cash holding activities, and their psychological characteristics have a major impact on cash holdings. This paper investigates the association between CEO organizational identification and firm cash holdings. The empirical results show that CEO organizational identification is negatively associated with firm cash holdings, and the negative association is more pronounced when the level of financial development is higher and economic uncertainty is lower. Further analysis reveals that the higher a CEO’s organizational identification, the higher the firm’s R&D investment and capital expenditure, and high CEO organizational identification can increase the value of firm cash holdings. Overall, our findings supplement the literature on organizational identification and cash holdings, and on the effect of executives’ psychological characteristics on corporate financial decision-making.

Evaluation of the composition and in vitro antimicrobial, antioxidant, and anti-inflammatory activities of Cilantro (Coriandrum sativum L. leaves) cultivated in Saudi Arabia (Al-Kharj).

BackgroundIn the present study, we explored the composition of Cilantro (Coriandrum sativum L. leaves) essential oil (CEO) cultivated in Saudi Arabia (Al-Kharj) and explored its antioxidant, antimicrobial, and anti-inflammatory effects in vitro.MethodsGas chromatography-mass spectroscopy was used to detect the CEO composition. The 2, 2-diphenyl-1-picrylhydrazyl (DPPH)-induced free radical and ferric chloride scavenging methods were used to determine the antioxidant activity. Antimicrobial activity was investigated using the well diffusion method. Anti-inflammatory activity was evaluated using egg albumin and trypsin-induced inflammation methods.ResultsForty-six compounds representing 90.17% of the total aroma were identified in the CEO; the major constituents were found to be 1-decanol (17.85%), decanal (11.04%), trans-2-dodecen-1-ol (7.87%), menthone (6.71%), 2-decen-1-ol, trans- (5.44%), dodecanal (4.76%), trans-tetradec-2-enal (3.14%), sedanolide (3.02), and thymol (3.01%). DPPH-induced free radical and ferric chloride scavenging assays demonstrated low antioxidant effects of CEO, and the antioxidant activity was observed at a high CEO concentration. The antimicrobial activity of CEO was assessed against 5 microorganisms (bacteria and fungi) by using well diffusion methods; CEO was found to possess excellent antimicrobial activity against all microorganisms, except Escherichia coli. Moreover, CEO demonstrated strong anti-inflammatory activity against egg albumin- and trypsin-induced inflammation.ConclusionThe essential oil extracted from C. sativum chemotype grown in Al-Kharj region of Saudi Arabia possesses low antioxidant potential, superior antimicrobial activity, and outstanding anti-inflammatory effects.

Does CEO pay slice reflect poor corporate governance?

AbstractWe examine whether high CEO pay inequality, measured by the share of total managerial pay captured by the CEO (CEO pay slice or CPS), is an outcome of poor corporate governance, and its implications for shareholder wealth. We exploit the 2002 NYSE and NASDAQ governance reforms that mandated firms to have majority independent boards as a quasi‐exogenous source of variation in the internal governance environment of firms. Results show that CPS decreases following the passage of these exchange listing regulations, for firms with entrenched CEOs affected by the exchange listing regulations. Firm value also increases for firms that likely suffer from agency conflicts in the pre‐regulation period. The novelty of our paper stems from combining the difference‐in‐difference estimation with CPS as a measure of CEO compensation, reducing the endogeneity concerns. Our paper links board independence, CPS, CEO entrenchment, and firm value by documenting that the impact of governance reforms on CPS is conditional on CEO entrenchment. Overall, our results suggest that poor corporate governance environments are associated with high CPS and consequently lower firm valuations, supporting the view that high CEO pay inequality reflects managerial entrenchment.

Does Increased Visibility to the IRS Cause Public Firms to Go Private? Evidence from FIN 48

This study investigates whether the introduction of a mandatory disclosure requirement (FIN 48), which had the effect of increasing public firms’ visibility to the tax authority, incentivized going-private transactions. Building on analytical work suggesting that disclosures required under FIN 48 act as a signal to the government regarding the uncertainty of the taxpayer’s position (Mills, Robinson, and Sansing 2010), I hypothesize and find evidence of an increased propensity to go private among aggressive tax planning firms following the enactment of the new disclosure rule but prior to its adoption. The effect is concentrated in firms with high CEO ownership, consistent with CEOs of tax aggressive firms viewing the mandated disclosures as damaging to the firm’s prospects and seeking to escape the anticipated effects to their personal wealth. Furthermore, I find that the spike in going-private transactions among tax aggressive firms is driven primarily by private equity-led buyouts. Overall, my findings suggest that mandatory disclosures giving rise to increased visibility to the tax authority may have the unintended consequence of discouraging some firms from operating as public entities.

Excessive CEO Compensation and Effort Contributions in the Non-Profit Sector

This study examines whether high executive compensation has adverse effects on volunteers' willingness to make labor contributions to nonprofit organizations. Using compensation information in IRS Form 990, we find that high CEO compensation negatively influences the number of future volunteers working for the nonprofit organization if executive compensation is considered to be excessively high, or if there is media attention regarding the CEO's compensation. These effects are most pronounced in smaller and more charitable organizations. Hence, our study presents previously undocumented implications of high executive compensation levels in the nonprofit sector.

Nanostructured CeO2/NiV–LDH composite for energy storage in asymmetric supercapacitor and as methanol oxidation electrocatalyst

• A high-performance, porous, faradaic CeO 2 /NiV–LDH nanocomposite is prepared. • Various components clearly reveal the strong synergistic effect for energy storage. • The CeO 2 /NiV-LDH (2:2) composite can act as electrocatalyst for methanol oxidation. • 3D flowerlike Bi 2 O 3 is synthesized and investigated as negative electrode material. • A quasi-solid-state ASC device is fabricated to examine its practicality. High-performance electrochemical supercapacitors should demonstrate notably high energy density along with ultralong cycling life for wide commercial applications. Hence, significant efforts are being made to improve the specific capacitance as well as expand the operating voltage of the fabricated supercapacitor device. Herein, a novel quasi-solid-state asymmetric supercapacitor (ASC) device employing porous nanostructured CeO 2 /NiV–LDH (2:2) composite positive electrode and 3D flowerlike Bi 2 O 3 negative electrode is reported. The positive electrode material shows an efficiently improved electrochemical feature from synergistic integration between high surface area CeO 2 nanorods, and 2D NiV–LDH nanosheets with short diffusion distance for the charge carriers. In addition, the CeO 2 /NiV–LDH (2:2) composite acts as highly active and stable electrocatalyst when investigated for the methanol electrooxidation. The as-fabricated gel electrolyte based quasi-solid-state CeO 2 /NiV–LDH (2:2)//Bi 2 O 3 ASC device exhibits an excellent and stable electrochemical performance (highest energy density of 62.5 Wh kg −1 at a power density of 1595.2 W kg −1 ) with long cycle life displaying 86.4% capacitance retention still after 10,000 GCD cycles. This work confirms the high suitability of the rare earth metal oxide and LDH-based composite electrode materials, as well as Bi chalcogenides, for the quasi-solid-state ASCs as proficient portable energy systems.

Independent directors’ legal expertise, bank risk-taking and performance

This study examines whether independent directors’ legal expertise affects bank risk-taking and performance. Using a sample of U.S. banks, we document that the proportion of legal experts among independent directors is negatively related to total risk and systematic risk, suggesting that legal experts are more effective in constraining bank risk-taking activities than other independent directors. In addition, this effect of legal expertise is more pronounced for banks with high CEO risk-taking incentives. We also find that independent directors’ legal expertise is negatively associated with Tobin’s q, in contrast to the notion that legal expertise can enhance bank performance. Overall, our findings suggest that legal experts among independent directors play a more effective role in the oversight of bank risk-taking than other directors; however, the mitigation of risk-taking does not necessarily improve bank performance.

CEOs’ self-disclosure on Instagram and consumer-brand relationships: the moderating effect of relationship norms

This study examined the effects of chief executive officers’ (CEOs) self-disclosure on consumer–brand relationships and the moderating role of brand relationship norms. To test the proposed hypotheses, a 2 × 2 factorial design was implemented with self-disclosure (high vs. low) and relationship norms (exchange v. communal) as the between-subjects factors. The results showed the interplay between the level of CEOs’ self-disclosure on Instagram and the type of relationship norms between consumers and brands and their effects on consumers’ attitudinal and behavioral responses. For participants primed with the communal norm, high CEO self-disclosure induced more positive attitudes toward the CEO and the brand as well as higher consumer intentions for self-disclosure, than the low CEO self-disclosure; these results were reversed for participants in the exchange norm condition. This study advances the theoretical understanding of brands’ social media engagement using CEOs and provides practical implications.

CEO power and bank risk in the UAE

The lessons from the 2008 global financial crisis show that excessive risk taking and governance failures contribute to the failure of several banks. As a result, the relationship between corporate governance mechanisms and risk taking has been the subject of many studies. However, extant studies report inconclusive results. Therefore, this study aims to investigate the relationship between CEO power and bank risk in the UAE using data over the period of 2015–2018 and a sample of 19 UAE banks. The study uses a Pearson pairwise correlation to analyze the relationship between CEO power and bank risk. In addition, a two-tailed t-test is used to examine the differences between conventional and Islamic banks in terms of CEO power and risk-taking. The results of the study show that CEO power measured using CEO duality and CEO tenure reduces risk. Furthermore, the paper indicates that larger boards and higher CEO ownership tend to increase risk. The study also reports that conventional banks have higher return variability, larger boards and powerful CEOs than Islamic banks. However, Islamic banks tend to have higher non-performing finances than conventional banks. The study provides important insights on the relationship between CEO power and bank risk and concurs with earlier studies. The findings can be of interest to policy makers and can be used as input data for the development of corporate governance mechanisms. Shareholders can also use the survey results as input when appointing a CEO for their banks.