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Non-compensation-related consultant service and CEO compensation
Institution:1. Department of Accounting, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 106, Taiwan;2. National Taiwan University, Taiwan;3. Graduate Institute of Accounting, National Chung Hsing University, Taiwan;1. Department of Accounting, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei 106, Taiwan;2. National Taiwan University, Taiwan;3. Graduate Institute of Accounting, National Chung Hsing University, Taiwan;1. Institute of Management Sciences, Peshawar, Pakistan;2. School of Accountancy, College of Business, Massey University, Auckland, New Zealand;1. School of Accounting, Curtin Business School, Curtin University, GPO Box U1987, Perth, Western Australia 6845, Australia;2. School of Accounting and Finance, The Business School, University of Adelaide, 10 Pulteney Street, Adelaide, South Australia 5005, Australia;1. Department of Respiratory and Critical Care Medicine, Tongji Hospital, Tongji Medical College, Huazhong University of Science and Technology, Wuhan, China;2. Key Laboratory of Respiratory Diseases, National Ministry of Health of the People’s Republic of China and National Clinical Research Center for Respiratory Disease, Wuhan, China;1. University of Macerata, Department of Economics and Law, via Crescimbeni 20, I-62100, Macerata, Italy
Abstract:This study examines how consultants’ non-compensation-related consulting service (NCS) affects the contractual usefulness of accounting and stock information in executive compensation, as reflected in pay-performance sensitivity. The hypothesis is based on anecdotal evidence suggesting that consultants’ provision of NCS is likely to adversely affect the quality of CEO compensation plans. We investigate whether the consultants providing NCS are involved in potential conflicts of interest. The results show that CEO pay is higher in companies where consultants provide NCS and have a higher NCS fee ratio. The pay-performance sensitivity in CEO compensation decreases when consultants engage in NCS. The overall results are consistent with NCS representing a conflict of interest and compromising the quality of compensation committees.
Keywords:CEO compensation  Compensation consultants  Non-compensation-related consulting service  Conflicts of interest  Pay-performance sensitivity
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