Research on the link between compensation consultants and higher CEO pay wins Corporate Finance award from the Financial Management Association.
A research paper from Cambridge Judge that found a clear link between the hiring of compensation consultants and higher CEO pay has been honoured as the winning Corporate Finance paper in the 2015 Financial Management Association awards.
The paper was co-authored by Raghavendra Rau, Sir Evelyn de Rothschild Professor of Finance, Jenny Chu, University Lecturer, and Jonathan Faasse, PhD student, all of Cambridge Judge Business School.
The award for best Corporate Finance paper was given 15 October at the annual meeting of the Financial Management Association in Orlando, Florida, where Professor Rau presented the paper. The award was sponsored by publisher Elsevier.
The study of more than 1,000 US companies over six years found “strong empirical evidence” that executive-pay consultants have been hired as a “justification device” for higher CEO pay. The study found such a direct link through the help of a 2009 US Securities and Exchange Commission rule change, which required companies to disclose fees if consultants provided compensation along with other services.
The research has received wide attention in the news media, including feature articles in The New York Times and The Economist.