Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 220-244 |
| Number of pages | 25 |
| Journal | Journal of Corporate Finance |
| Volume | 45 |
| DOIs | |
| Publication status | Published - 2017 Aug 1 |
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All Science Journal Classification (ASJC) codes
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management
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Network connections, CEO compensation and involuntary turnover : The impact of a friend of a friend. / Balsam, Steven; Kwack, So Yean; Lee, Jae Young.
In: Journal of Corporate Finance, Vol. 45, 01.08.2017, p. 220-244.Research output: Contribution to journal › Article
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
PY - 2017/8/1
Y1 - 2017/8/1
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.
UR - http://www.scopus.com/inward/record.url?scp=85019370764&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85019370764&partnerID=8YFLogxK
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 -