Essay 1. The home court advantage and CEO real asset performance persistence. Essay 2. Automatic ratcheting of CEO pay.

摘要

In this dissertation two distinct but complimentary topics are researched. The first is CEO real asset performance persistence over the long term. The second is the causes behind the increase in CEO pay over the long term.The first chapter investigates the residual income and return on asset performance of 19,444 different CEOs at non-financial firms spanning 53 years including 2,397 outside hire CEOs. By testing the optimal skills matching model we show that (1) some firm-CEO pairs have persistence of superior performance beyond chance expectations, (2) superior CEOs make essential contributions which are rarely transferable across firms, even at large firms. CEOs as a group do not achieve persistent superior performance. However, there is a small percentage of CEOs that do they are usually inside hires. Finally, median cumulative performance for inside hires is at least as great as that of outside hires. That is we demonstrate insiders have the home court advantage.In chapter 2 we examine median CEO compensation between 1970 and 2002 and find that it is rising faster than can be explained by increasing performance or increasing power for the group of CEOs. Our results suggest that ratcheting explains 75 percent of the elevation in median CEO pay since 1970. Ratcheting is set up by using prior year peer pay to determine compensation in the current year. Likely ratcheting started in the early 1980s coincident with a four times increase in compensation consultant revenue growth. Peer pay becomes inflated for all CEOs because a majority of boards acquiesce to CEOs pressure. Excess pay is most often given when the CEO is also COB and when there is a cover that negates the effect of investor outrage on the board.