TY - JOUR
T1 - Network connections, CEO compensation and involuntary turnover
T2 - The impact of a friend of a friend
AU - Balsam, Steven
AU - Kwack, So Yean
AU - Lee, Jae Young
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/8
Y1 - 2017/8
N2 - We show that hard to observe, indirect connections between a CEO and “independent” board members are associated with higher CEO compensation. While we find this result for the “friend of a friend” connection, we do not find it for direct connections, i.e. friends sitting on the board. We postulate that this differential result is caused by directors with readily observable connections to the CEO being wary of provoking outrage. In contrast we find both types of connections associated with reduced involuntary CEO turnover, suggesting that outrage is not as big a concern, e.g., compensation is the foci of stakeholders.
AB - We show that hard to observe, indirect connections between a CEO and “independent” board members are associated with higher CEO compensation. While we find this result for the “friend of a friend” connection, we do not find it for direct connections, i.e. friends sitting on the board. We postulate that this differential result is caused by directors with readily observable connections to the CEO being wary of provoking outrage. In contrast we find both types of connections associated with reduced involuntary CEO turnover, suggesting that outrage is not as big a concern, e.g., compensation is the foci of stakeholders.
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U2 - 10.1016/j.jcorpfin.2017.05.001
DO - 10.1016/j.jcorpfin.2017.05.001
M3 - Article
AN - SCOPUS:85019370764
VL - 45
SP - 220
EP - 244
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
ER -