Stock price informativeness and the complexity of CEO compensation

Benjamin Bennett, Gerald Garvey, Todd Milbourn, and Zexi Wang

We study the effects of stock price informativeness (SPI) on the complexity of executive compensation. Using textual analysis of SEC proxy statements to construct measures of compensation complexity, we find informative stock prices reduce pay complexity. Using mutual fund redemption as an exogenous decrease in SPI, we find when the redemption pressure is high (SPI is low), CEO pay is more complex and more closely linked to accounting performance and peer firm performance. Compensation complexity leads to more excess pay, more perquisite pay, and lower future ROA. Shareholders show concerns about complex pay and require more frequent Say-on-Pay votes

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Year of publication:	[2019]
Authors:	Bennett, Benjamin ; Garvey, Gerald ; Milbourn, Todd ; Wang, Zexi
Publisher:	[Columbus, Ohio] : [The Ohio State University, Fisher College of Business, Charles A. Dice Center for Research in Financial Economics]
Subject:	Compensation complexity \| Stock price informativeness \| Market monitoring \| Proxy statements \| Textual analysis \| Börsenkurs \| Share price \| Managervergütung \| Executive compensation \| Prinzipal-Agent-Theorie \| Agency theory \| Theorie \| Theory \| Führungskräfte \| Managers