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Pay for Talk: How the Use of Shareholder‐Value Language Affects CEO Compensation
Author(s) -
Shin Taekjin,
You Jihae
Publication year - 2017
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/joms.12218
Subject(s) - shareholder , corporate governance , shareholder value , conformity , argument (complex analysis) , executive compensation , accounting , legitimacy , compensation (psychology) , business , value (mathematics) , shareholder primacy , norm (philosophy) , psychology , political science , social psychology , law , finance , biochemistry , chemistry , machine learning , politics , computer science
The language that signals conformity to a prevailing norm can contribute to the appearance of managerial competency and organizational legitimacy. We argue that top corporate managers’ use of language that is congruent with a prevailing norm leads the boards of directors to evaluate the managers more favourably and to grant a higher level of compensation. We test this argument by analysing the letters to shareholders from 334 US firms and examine the CEOs’ expression of the shareholder value principle, which is a prevailing model of corporate governance in the USA. We found that the use of shareholder‐value language is significantly related to a higher level of CEO compensation and that the effect of shareholder‐value language is greater when shareholder activism is stronger.