Benchmarking of Pay Components in CEO Compensation Design

Benchmarking of Pay Components in CEO Compensation Design

Yaniv Grinstein, Beni Lauterbach, Revital Yosef

Series number :

Serial Number: 
768/2021

Date posted :

June 28 2021

Last revised :

February 14 2023
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Keywords

  • Benchmarking • 
  • CEO compensation • 
  • peer group • 
  • pay mix • 
  • pay components

We document an important element of CEO compensation design – benchmarking of the pay components.

Analyzing a panel of CEO compensation data entailing 1,451 S&P 1500 firms during 2006-2019, we find that: 1) Component-of-pay benchmarking more effectively explains CEO compensation design than does total compensation benchmarking; 2) Most pay components exhibit similar benchmarking behavior; the only exception is the milder adjustment of salary to that of peers; 3) Benchmarking of the weight of each component in total compensation is also apparent. Our results suggest that benchmarking of pay components is an economically fundamental part of CEO compensation design.

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Published in

Published in: 
Description: 
Journal of Corporate Finance, Forthcoming

Authors

Real name:
Revital Yosef