The Power of the Pen and Executive Compensation

Posted: 17 Sep 2007

See all articles by John E. Core

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Wayne R. Guay

University of Pennsylvania - Accounting Department

David F. Larcker

Stanford Graduate School of Business; Stanford University - Hoover Institution; European Corporate Governance Institute (ECGI)

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Abstract

We examine the press' role in monitoring and influencing executive compensation practice using more than 11,000 press articles about CEO compensation from 1994 to 2002. Negative press coverage is more strongly related to excess annual pay than to raw annual pay, suggesting a sophisticated approach by the media in selecting CEOs to cover. However, negative coverage is also greater for CEOs with more option exercises, suggesting the press engages in some degree of "sensationalism." We find little evidence that firms respond to negative press coverage by decreasing excess CEO compensation or increasing CEO turnover.

Keywords: press, media, executive compensation, corporate governance

JEL Classification: G32, G34, J33, M41

Suggested Citation

Core, John E. and Guay, Wayne R. and Larcker, David F., The Power of the Pen and Executive Compensation. Journal of Financial Economics Vol. 88, No. 1 (April, 2008), pp. 1-25, Available at SSRN: https://ssrn.com/abstract=1014447

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Wayne R. Guay (Contact Author)

University of Pennsylvania - Accounting Department ( email )

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David F. Larcker

Stanford Graduate School of Business ( email )

Graduate School of Business
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Stanford University - Hoover Institution ( email )

Stanford, CA 94305
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European Corporate Governance Institute (ECGI) ( email )

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Belgium

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