This study examines whether the mandated disclosure of CEO-to-employee pay ratios motivates firms to curb CEO pay. In July 2010, the U.S. Congress directed the SEC, via Section 953(b) of the Dodd-Frank Act, to enforce a rule that requires firms to disclose the ratio of the CEO’s pay to the median employee’s pay (the “rule”). The SEC proposed the rule in September 2013 and adopted it in August 2015. Though the SEC contends that the rule is intended to benefit shareholders, opponents claim that the rule is intended to shame firms into reducing CEO pay. I consider the merits of the opponents’ claim and conclude that it is consistent with theory that posits that disclosure mandates can be used to motivate disclosers to behave in a desired way. I then analyze the origins of the rule in light of this theory and conclude that it presents a suitable setting to test the said theory. Based on this conclusion, as well as evidence indicating that firms are likely to incur reputational losses from disclosing pay ratios, I hypothesize that firms that are required to comply with the rule (relative to firms that are not) will curb CEO pay prior to their first pay ratio disclosures. I further hypothesize this relative curb on CEO pay will be greater for firms that are more sensitive to the reputational effects of the rule (i.e., firms that are more susceptible to public scrutiny of pay ratios or adverse stakeholder reactions to pay ratios). While I find no evidence to support the former, I do find evidence to support the latter. In particular, although I find no evidence of a curb on residual CEO pay (i.e., the portion of pay that is not predicted by economic determinants) in response to the SEC’s proposal (or adoption) at the average firm, I do find evidence of a curb in response to the SEC’s proposal (but not adoption) at select firms that are more sensitive to the reputational effects of the rule. This result is important because it shows that, regardless of the rule’s intended objectives, reputational concerns motivate some firms to behave as if the rule shamed them into curbing CEO pay. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Summer Semester 2018. / July 16, 2018. / Includes bibliographical references. / Richard M. Morton, Professor Directing Dissertation; Yingmei Cheng, University Representative; Bruce K. Billings, Committee Member; Tianming Zhang, Committee Member.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_647243 |
| Contributors | Johnson, Tristan B. (author), Morton, Richard M. (professor directing dissertation), Cheng, Yingmei (university representative), Fendler, Rachel Loveitt (university representative), Billings, Bruce K. (committee member), Zhang, Tianming (committee member), Florida State University (degree granting institution), College of Business (degree granting college), Department of Accounting (degree granting departmentdgg) |
| Publisher | Florida State University |
| Source Sets | Florida State University |
| Language | English, English |
| Detected Language | English |
| Type | Text, text, doctoral thesis |
| Format | 1 online resource (108 pages), computer, application/pdf |
Page generated in 0.002 seconds