abstract
We examine whether compensation consultants’ potential cross-selling incentives
explain more lucrative CEO pay packages using 755 firms from the S&P 1500 for 2006.
Critics allege that these incentives lead consultants to bias their advice to secure greater
revenues from their clients [Waxman, H., 2007. Executive pay: conflicts of interest
among compensation consultants. United States House of Representatives Committee
on Oversight and Government Reform Majority Staff, December]. Among firms that
retain consultants, we are unable to find widespread evidence of higher levels of pay or
lower pay-performance sensitivities for clients of consultants with potentially greater
conflicts of interest. Overall, we do not find evidence suggesting that potential conflicts
of interest between the firm and its consultant are a primary driver of excessive CEO
pay.
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