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| Author: | Faulkender, M. Yang, J. |
| Title: | Inside the black box: the role and composition of compensation peer groups |
| Journal: | Journal of Financial Economics
2010 : MAY, VOL 96:2, p. 257-270 |
| Index terms: | executive remuneration benchmarking |
| Language: | eng |
| Abstract: | The purpose of this article is to discuss the characteristics of compensation peer groups used by companies to assess the level of their executive compensation, and demonstrate how the groups explain the variations in the compensations. The authors find that companies tend to select peers that are highly paid in order to justify their own oversized CEO compensation. This effect is found to be stronger in companies with smaller compensation peer group or where CEO is the chairman of the board of directions or has longer tenure. Further, the effect is also supported when the directors are members of multiple boards. |
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