Network connections, CEO compensation and involuntary turnover : The impact of a friend of a friend

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

9 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)220-244
Journal / PublicationJournal of Corporate Finance
Volume45
Online published5 May 2017
Publication statusPublished - Aug 2017

Abstract

We show that hard to observe, indirect connections between a CEO and “independent” board members are associated with higher CEO compensation. While we find this result for the “friend of a friend” connection, we do not find it for direct connections, i.e. friends sitting on the board. We postulate that this differential result is caused by directors with readily observable connections to the CEO being wary of provoking outrage. In contrast we find both types of connections associated with reduced involuntary CEO turnover, suggesting that outrage is not as big a concern, e.g., compensation is the foci of stakeholders.

Research Area(s)

  • CEO compensation, CEO turnover, Connections, Direct connections, Indirect connections

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Research Unit(s) information for this publication is provided by the author(s) concerned.