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.
Prior literature on the relationship between the departure of strategic human capital (SHC) and firm performance is equivocal. One source of this ambiguity is the potential endogeneity: Is it the SHC departure that leads to poor firm performance, or is it poor firm performance leading to the SHC departure? We respond to repeated calls to address this issue by using the Fukushima nuclear accident in Japan as an exogenous event which triggered a "butterfly effect" that influenced the departure decisions of individuals working for firms near a nuclear plant in the United States but not the firms' performance. Our results provide strong evidence that the departure of SHC undermines firm performance, and that the effect is amplified by the strength of employee-firm relationships.
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