Department of Accounting,
Fu Jen Catholic University, New Taipei city, Taiwan
Article published in
"Corporate Governance: An International Review"
Volume28, Issue2, March 2020, Pages 141-156
The study examines whether the presence of social ties between compensation committee members and executives explains pay-for-luck asymmetry in compensation, which means that the compensation contracts reward executives with higher pay for good luck but minimally penalize them with lower pay for bad luck. Research Findings/Insights We find that half of our sample firms have a friendly compensation committee, defined as the majority of the committee members having at least two social ties with executives. For firms with a friendly compensation committee, executives tend to be rewarded for good luck but not be penalized for bad luck, which indicates the presence of pay-for-luck asymmetry. For firms without a friendly compensation committee, their executive compensation is not associated with good luck or bad luck. ocial ties information.[ Full article]