*********************************
There is now a CONTENT FREEZE for Mercury while we switch to a new platform. It began on Friday, March 10 at 6pm and will end on Wednesday, March 15 at noon. No new content can be created during this time, but all material in the system as of the beginning of the freeze will be migrated to the new platform, including users and groups. Functionally the new site is identical to the old one. webteam@gatech.edu
*********************************
TITLE: Is Disclosure an Effective Cleansing Mechanism? The Dynamics of
Compensation Peer Benchmarking
SPEAKER: Professor Jun Yang
ABSTRACT:
It has become a regular practice for firms to justify their CEO
compensation by referring to a group of companies with highly paid CEOs,
claiming they compete for managerial talent with those selected peer
companies. This paper examines the dynamics of the peer benchmarking
process, addressing whether the 2006 regulatory requirement of disclosing
compensation peers has cast sunshine on the practice and thus mitigated
firms' opportunistic behavior of benchmarking CEO compensation against a
group of self-selected, highly-paid peer CEOs (Faulkender and Yang, 2010;
Bizjak, Lemmon, and Nguyen, 2011). Our evidence shows the manipulation of
the benchmarking process did not stop after disclosure became mandatory
in 2006. It actually became more severe at firms that received
substantial shareholder complaints about their compensation practices,
and at firms with low institutional ownership, busy Boards of Directors,
and large Boards of Directors. These findings call into question the
ability of mere disclosure to remedy potential abuses in determining
executive compensation.
Bio:
Jun Yang has been an Assistant Professor of Finance at Kelley School of
Business, Indiana University since 2005. Jun's research interest is in
the areas of Financial Contracting, Corporate Governance, and Executive
Compensation. Jun has publications at top quality journals such as
Journal of Financial Economics, Review of Financial Studies, Management
Science, Journal of Economic Theory, and Production and Operations
Management. Jun received her Ph.D. in Finance from Washington University
in Saint Louis in 2005, and Ph.D. in Operations Management from The
Chinese University of Hong Kong in 1997. Her M.Sc. and B.Sc. (summa cum
laude) are from Tsinghua University in China.
