Nonmonetary benefits, quality of life, and executive compensation
Date of Issue2013
College of Business (Nanyang Business School)
We examine the effects of nonmonetary benefits on overall executive compensation from the perspective of the living environment at the firm headquarters. Companies in polluted, high crime rate, or otherwise unpleasant locations pay higher compensation to their chief executive officers (CEOs) than companies located in more livable locations. This premium in pay for quality of life is stronger when firms face tougher competition in the managerial labor market, when the CEO is hired from outside, and when the CEO has short-term career concerns. Overall, the geographic desirability of the corporate headquarters is an effective substitute for CEO monetary pay.
Journal of financial and quantitative analysis
© 2013 Michael G. Foster School of Business, University of Washington. This paper was published in Journal of Financial and Quantitative Analysis and is made available as an electronic reprint (preprint) with permission of Michael G. Foster School of Business, University of Washington. The paper can be found at the following official DOI: [http://dx.doi.org/10.1017/S0022109013000033]. One print or electronic copy may be made for personal use only. Systematic or multiple reproduction, distribution to multiple locations via electronic or other means, duplication of any material in this paper for a fee or for commercial purposes, or modification of the content of the paper is prohibited and is subject to penalties under law.