{"title":"Do compensation committees do what they say they do? Evidence from narrative disclosure in proxy statements","authors":"Natalie Kyung Won Kim, Sewon Kwon, Jae Yong Shin","doi":"10.1016/j.frl.2024.106637","DOIUrl":null,"url":null,"abstract":"The Compensation Discussion and Analysis section in proxy statements provides narrative data on how Compensation Committees define and apply their Compensation Philosophy. However, the extent to which these philosophies—pay-for-performance and the attraction and retention of talented executives—translate into executive compensation practices remains unclear. To address this, we conduct a textual analysis of proxy statements from 2007 to 2016 to examine whether Compensation Committees align executive compensation with their stated philosophies. The findings show a stronger focus on pay-for-performance is linked to higher excess compensation, especially in firms lacking a general counsel among top officers and not employing a compensation consultant.","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"293 1","pages":""},"PeriodicalIF":7.4000,"publicationDate":"2024-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1016/j.frl.2024.106637","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
The Compensation Discussion and Analysis section in proxy statements provides narrative data on how Compensation Committees define and apply their Compensation Philosophy. However, the extent to which these philosophies—pay-for-performance and the attraction and retention of talented executives—translate into executive compensation practices remains unclear. To address this, we conduct a textual analysis of proxy statements from 2007 to 2016 to examine whether Compensation Committees align executive compensation with their stated philosophies. The findings show a stronger focus on pay-for-performance is linked to higher excess compensation, especially in firms lacking a general counsel among top officers and not employing a compensation consultant.
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