We consider a central puzzle surrounding CEO accountability: What explains the payoffs and penalties that CEOs receive? Invoking Fama's concept of "settling up," we examine how a CEO's entire performance record and history of prior over- or underpayment affect current pay and the odds of dismissal. We find that some parts of a CEO's historical track record work to remedy prior over- or underpayment, whereas other aspects result in greater imbalances, as rich CEOs get richer while poorer ones get poorer. History matters when boards reward or punish their CEOs, but such reckoning is relatively complex.
All Science Journal Classification (ASJC) codes
- Business and International Management
- Business, Management and Accounting(all)
- Strategy and Management
- Management of Technology and Innovation