CFO role and CFO compensation: An empirical analysis of their implications
| Autor: | Ariela Caglio, Andrea Dossi, Wim A. Van der Stede |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
040101 forestry
HG Finance Executive compensation Sociology and Political Science CFO COMPENSATION DETERMINANTS business.industry CHIEF FINANCIAL OFFICER (CFO) 05 social sciences Accounting HF5601 Accounting 050201 accounting 04 agricultural and veterinary sciences Fiduciary Incentive Negatively associated 0502 economics and business 0401 agriculture forestry and fisheries CFO COMPENSATION DETERMINANTS CFO COMPENSATION EFFECTS CFO INCENTIVE COMPENSATION CFO ROLE CHIEF FINANCIAL OFFICER (CFO) ACCOUNTING SOCIOLOGY AND POLITICAL SCIENCE business CFO COMPENSATION EFFECTS CFO INCENTIVE COMPENSATION Executive team CFO ROLE A determinant |
| Zdroj: | Journal of Accounting and Public Policy. 37:265-281 |
| ISSN: | 0278-4254 |
| DOI: | 10.1016/j.jaccpubpol.2018.07.002 |
| Popis: | Given concerns over CFO pay, especially incentives, and considering the tension between a CFO’s fiduciary responsibility and being a key member of the firm’s executive team, we examine the determinants and effects of CFO compensation amount, incentive intensity, and proximity to CEO compensation in a sample of European companies (FTE 500, 2005–2009). First, we focus on the CFO role as a determinant of CFO compensation. Like prior work, we proxy for CFO roles by using hand-collected public data on education and past professional experience, but we supplement these proxies with proprietary data to more directly capture the firm-specific nature of the CFO job in term of its similarity with that of the CEO. We thus argue how CFOs can have varied roles characterized by different levels of financial expertise and CEO-likeness, and document that it is this latter aspect that is associated with CFO compensation. Second, we study the effects of CFO compensation design on outcomes in the CFO’s realm related to financial reporting. We find that CFO financial expertise is positively associated with financial reporting quality, while a CFO’s pay long-term incentive intensity and a CFO’s incentive compensation proximity with the CEO are negatively associated with financial reporting quality. Overall, then, our results suggest that CFOs get rewarded for their CEO-likeness, and particularly for their being similar to the CEO in terms of tasks and decision making authority. But it is their financial expertise that is positively related to financial reporting quality. At the same time, using compensation that is more incentive intensive and more similar to that of the CEO appears to be potentially detrimental to the quality of financial reporting. These results are relevant for boards involved in selecting highly expert CFOs, and their compensation committees charged with defining subsequently effective incentive compensation plans for those CFOs. |
| Databáze: | OpenAIRE |
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