Generalists versus specialists: lifetime work experience and chief executive officer pay

Research output: Contribution to journalArticlepeer-review

422 Citations (Scopus)

Abstract

We show that pay is higher for chief executive officers (CEOs) with general managerial skills gathered during lifetime work experience. We use CEOs' résumés of Standard and Poor's 1,500 firms from 1993 through 2007 to construct an index of general skills that are transferable across firms and industries. We estimate an annual pay premium for generalist CEOs (those with an index value above the median) of 19% relative to specialist CEOs, which represents nearly a million dollars per year. This relation is robust to the inclusion of firm- and CEO-level controls, including fixed effects. CEO pay increases the most when firms externally hire a new CEO and switch from a specialist to a generalist CEO. Furthermore, the pay premium is higher when CEOs are hired to perform complex tasks such as restructurings and acquisitions. Our findings provide direct evidence of the increased importance of general managerial skills over firm-specific human capital in the market for CEOs in the last decades.

Original languageEnglish
Pages (from-to)471-492
Number of pages22
JournalJournal of Financial Economics
Volume108
Issue number2
DOIs
Publication statusPublished - 1 May 2013

Keywords

  • Executive compensation
  • Human capital
  • Market for executives

Fingerprint

Dive into the research topics of 'Generalists versus specialists: lifetime work experience and chief executive officer pay'. Together they form a unique fingerprint.

Cite this