Labor Relations Commons^™

The Timeliness Of Performance Information In Determining Executive Compensation, Kevin F. Hallock, Paul Oyer

Kevin F Hallock

We study whether boards of directors concentrate on performance near compensation decision times rather than providing consistent incentives for chief executive officers (CEO). throughout the fiscal year. We show empirically that managers can profit by moving sales revenue among fiscal quarters. Though this may suggest that boards use short-term trends when determining rewards, we find evidence consistent with boards tying pay to recent sales growth so as to use the best information about future performance. We also find that the timing of profits throughout the year does not affect CEO pay, which may suggest that smoothing firm income is important …