TITLE

CEO successor compensation: outside versus inside successions

AUTHOR(S)
Elsaid, Eahab; Davidson, Wallace; Wang, Xiaoxin
PUB. DATE
May 2011
SOURCE
Journal of Management & Governance;May2011, Vol. 15 Issue 2, p187
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We propose that outside CEO candidates will have greater bargaining power than insiders. As a result, outside CEO successors will likely receive greater total compensation than inside CEO successors. Outside successors, meantime, pose more risk to the hiring firm than inside successors due to higher information asymmetry. As a result, outside successor compensation packages are tilted towards more performance-related pay-at-risk, while inside successor packages have a higher percentage in salary. In addition, outside successors may want to utilize the structure of their compensation at their previous firm in their new contracts. Using a sample of 99 firms with outside successors who were not CEO in their prior firms, matched by industry and size to firms that hired inside candidates, we find evidence supporting these hypotheses.
ACCESSION #
59929568

 

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