Executive compensation: does industry risk matter?
International Journal of Organization Theory & Behavior
ISSN: 1093-4537
Article publication date: 1 March 2008
Abstract
Prior studies of the role of risk in executive compensation focus on market risk and firm risk, neglecting the role of industry risk in explaining executive compensation. We include industry risk and find that the portion of CEO compensation for bearing industry risk is greater than the portion of CEO compensation for bearing market risk. Consistent with the human capital of a CEO being non-diversifiable, CEOs also receive compensation for bearing firm-specific risk, in contrast to investors, who can diversify their risk over many assets. CEOs are compensated for bearing firm-specific risks through all the compensation tools we examine; salary, bonus, option grants and option exercises. CEOs are compensated for bearing market and industry risk primarily through stock option grants.
Citation
Haggard, D.L. and Haggard, K.S. (2008), "Executive compensation: does industry risk matter?", International Journal of Organization Theory & Behavior, Vol. 11 No. 4, pp. 451-470. https://doi.org/10.1108/IJOTB-11-04-2008-B001
Publisher
:Emerald Publishing Limited
Copyright © 2008 by PrAcademics Press