Management Accounting Section Midyear Meeting

Top Human Resources Executives and CEO Compensation

• In Event: Performance Pressure

Abstract

We examine the role of top HR executives in CEO compensation decisions. Using a sample of Standard & Poor’s (S&P) 1500 firms from 2006 to 2017, we find that the presence of a top HR executive is associated with higher CEO compensation and a higher CEO pay slice (CPS) among named executive officers. Our results suggest that top HR executives benefit CEOs in the context of CEO compensation, especially when the HR executive is co-opted (i.e., hired after the CEO). In addition, our findings are consistent with top HR executives facilitating implicit contracting between the board of directors and the CEO. Firms with top HR executives are more likely to include non-public information in CEO compensation contracts early in the CEOs’ tenure; and to make ex post adjustments to earnings measures used in CEO annual bonus contracts.

Authors

• Natalie Kyung Won Kim, IE University

• Sewon Kwon, Ewha Women's University

• Jae Yong Shin, Seoul National University