Management Accounting Section Midyear Meeting

Compensation for Generalist versus Specialist CFOs

• In Event: CEO Compensation

Abstract

Using hand-collected data, we create a measure that classifies CFOs’ lifetime work experience as contributing to relatively more general human capital or specialized human capital. We find that total compensation is increasing (decreasing) in CFOs’ general (specialized) human capital. Overall, our results are consistent with generalist CFOs receiving a compensation premium, which is driven by their higher productivity compared to specialist CFOs. We conduct several analyses aimed to rule out alternative explanations for this effect (e.g., uncertainty of CFO-firm fit, relocation costs and equity forfeiture during firm switches, and CFO risk aversion). Additional analyses suggest that, CFOs with more general human capital secure a larger pay slice than CFOs with more specialized human capital and, unlike generalist CEOs, generalist CFOs are hired by smaller firms.

Authors

• Kristin M. Stack, University of Kansas

• Joshua Gunn, University of Pittsburgh

• Chan Li, University of Kansas