Changes in CEO compensation structure and the impact on firm performance following CEO turnover

David W. Blackwell, Donna M. Dudney, Kathleen A. Farrell

Research output: Contribution to journalArticlepeer-review

23 Scopus citations

Abstract

We document changes in compensation structure following CEO turnover and relate them to future performance. Compared to outgoing CEOs, incoming CEOs derive a significantly greater percentage of their compensation from option grants and new stock grants. The voluntary turnover sample shows similar changes in compensation structure while the forced turnover sample results suggest that new stock grants drive the significant increase in incentive compensation following turnover. Post-turnover performance is positively associated with new stock grants as a percentage of total compensation in the full sample and when analyzing forced and voluntary turnovers separately. We find limited evidence that future operating income is positively associated with option grants following forced turnover. Post-turnover improvement in operating income is positively associated with an increase in new stock grants for the incoming relative to the outgoing CEO.

Original languageEnglish
Pages (from-to)315-338
Number of pages24
JournalReview of Quantitative Finance and Accounting
Volume29
Issue number3
DOIs
StatePublished - Oct 2007

Keywords

  • CEO turnover
  • Compensation structure
  • Executive compensation
  • Firm performance

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (all)
  • Finance

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