The long-term impact of CEO compensation structure on CEO pay for luck and asymmetry

This study examines the impact of long-term trend of CEO pay structure on CEO pay for luck and the asymmetric benchmarking of CEO pay over a 72-year period from 1949 to 2020. We find that both CEO pay structure and pay for non-performance incur dramatic changes since the 1970s. The widely adopted options awarded to CEOs since the 1980s not only lead to a sharp increase of the level of CEO compensation, but also significantly amplify the phenomenon of CEO pay for non-performance and pay asymmetry. However, a wave of executive pay-related regulations in the 2000s and the rapidly rising stock awards have changed the situation characterized by the diminishing CEO pay for luck and pay asymmetry in the past decades. Our findings support a time-varying CEO pay for luck and pay asymmetry in the long run due to the changing CEO compensation structure under various circumstances.