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New Perspectives on the Governance of Executive Compensation: Examining the Role and Effect of Compensation Consultants

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>2011
<mark>Journal</mark>Journal of Management and Governance
Issue number1
Volume15
Number of pages30
Pages (from-to)29-58
Publication StatusPublished
<mark>Original language</mark>English

Abstract

We develop a multi-theoretic approach, drawing on economic, institutional, managerial power and social comparison literatures to explain the role of the external compensation consultant in the top management pay setting institutional field. Taking advantage of recent disclosure requirements in the UK, we collect data on compensation consultant use in 232 large companies. We show that consultants are a prevalent part of the CEO pay setting scene, and document evidence of all advisor use. Our econometric results show that consultant use is associated with firm size and the equity pay mix. We also show that CEO pay is positively associated with peer firms that share consultants, with higher board and consultant interlocks, and some evidence that where firms supply other business services to the firm, CEO pay is greater.