Prior studies of the role of risk in executive compensation focus on market risk and firm risk, neglecting the role of industry risk in explaining executive compensation. We include industry risk and find that the portion of CEO compensation for bearing industry risk is greater than the portion of CEO compensation for bearing market risk. Consistent with the human capital of a CEO being non-diversifiable, CEOs also receive compensation for bearing firm-specific risk, in contrast to investors, who can diversify their risk over many assets. CEOs are compensated for bearing firm-specific risks through all the compensation tools we examine; salary, bonus, option grants and option exercises. CEOs are compensated for bearing market and industry risk primarily through stock option grants.
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1 March 2008
Research Article|
March 01 2008
Executive compensation: does industry risk matter? Available to Purchase
Dana L. Haggard;
Dana L. Haggard
Department of Management of the College of Business Administration, Missouri State University
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K. Stephen Haggard
K. Stephen Haggard
Department of Finance and General Business of the College of Business Administration, Missouri State University
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Publisher: Emerald Publishing
Online ISSN: 1532-4273
Print ISSN: 1093-4537
Copyright © 2008 by PrAcademics Press
2008
licensed reuse rights only
International Journal of Organization Theory & Behavior (2008) 11 (4): 451–470.
Citation
Haggard DL, Haggard KS (2008), "Executive compensation: does industry risk matter?". International Journal of Organization Theory & Behavior, Vol. 11 No. 4 pp. 451–470, doi: https://doi.org/10.1108/IJOTB-11-04-2008-B001
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