Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • January 2020
  • Article
  • Accounting Review

Compensation Consultants and the Level, Composition, and Complexity of CEO Pay

By: Kevin J. Murphy and Tatiana Sandino
  • Format:Print
ShareBar

Abstract

We provide fresh evidence regarding the relation between compensation consultants and CEO pay. First, firms that employ consultants have higher-paid CEOs—this result is robust to firm fixed effects and matching on economic and governance variables. Second, while this relation is partly due to consultant conflicts of interest, it is largely explained by the impact consultants have on the composition and complexity of CEO pay plans; notably, this impact fully mediates the consultant-CEO pay relation. Third, firms with higher-paid CEOs and more complex pay plans are more likely to hire a consultant. Lastly, say-on-pay voting patterns suggest shareholders view positively the advice consultants provide but only when consultants do not provide other services. We also find suggestive evidence of boards “layering” new equity incentive plans over existing ones, thereby increasing the impact of composition and complexity on CEO pay beyond the premium the CEO would demand for bearing additional compensation risk.

Keywords

Consultants; Benchmarking; Incentive Pay; Executive Compensation; Complexity; Motivation and Incentives; Governance

Citation

Murphy, Kevin J., and Tatiana Sandino. "Compensation Consultants and the Level, Composition, and Complexity of CEO Pay." Accounting Review 95, no. 1 (January 2020): 311–341.
  • SSRN
  • Find it at Harvard

About The Author

Tatiana Sandino

Accounting and Management
→More Publications

More from the Authors

    • 2023
    • Faculty Research

    The Impact of Subunit Culture Consistency on Employee and Customer Outcomes

    By: Jasmijn Bol, Robert Grasser, Serena Loftus and Tatiana Sandino
    • June 2022 (Revised January 2023)
    • Faculty Research

    Buurtzorg

    By: Ethan Bernstein, Tatiana Sandino, Joost Minnaar and Annelena Lobb
    • 2020
    • Faculty Research

    From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network

    By: Shelley Xin Li and Tatiana Sandino
More from the Authors
  • The Impact of Subunit Culture Consistency on Employee and Customer Outcomes By: Jasmijn Bol, Robert Grasser, Serena Loftus and Tatiana Sandino
  • Buurtzorg By: Ethan Bernstein, Tatiana Sandino, Joost Minnaar and Annelena Lobb
  • From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network By: Shelley Xin Li and Tatiana Sandino
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College