The Relationship Between CEO Media Appearances and Compensation

Abstract

Why do chief executive officers (CEOs) seek media appearances and what benefit do they gain from it? Using a sample of 2,666 U.S. firms from 1997 to 2009, we found that a CEO’s appearance in CNBC interviews and major news articles has a positive relationship with his or her compensation in the following year, after controlling for firm performance and other confounding factors. We further found that the positive relationship is weaker when the CEO is with a large company and is stronger when the CEO is with a company demonstrating strong stock market performance. Finally, we found that when the CEO has a high equity ownership or is a founder CEO, the positive relationship disappears.

Media Coverage of Firms: Background, Integration, and Directions for Future Research

“…Governance is another frequent subject in the news media coverage of firms. Research on governance contexts focuses on a distinct set of topics, including board quality (Joe et al, 2009; Johnson, Ellstrand, Dalton, & Dalton, 2005), attribution of firm performance to its executives (Westphal & Deephouse, 2011; Westphal et al, 2012), executive compensation (Core et al, 2008; Kang & Kim, 2017), firms’ corporate social responsibility (CSR; Kolbel, Busch, & Jancso, 2017; Nikolaeva & Bicho, 2011), and changes in governance (Bednar, 2012; Dixon-Fowler, Ellstrand, & Johnson, 2013).…”

“…However, Kuhnen and Niessen show that in response to critical media coverage, option-based pay-a stigmatized form of compensation-is replaced with stock-based or salary compensation. While this seeming contradiction with Bednar's work might be explained by different measures of media coverage, a more explicit contradiction arises from a recent study by Kang and Kim (2017). They find that CEOs who feature frequently in the media receive higher compensation, especially if they lead smaller firms with high performance and have not founded their firm.…”

“…Such fragmentation (Carroll & Deephouse, 2014) has resulted in a diversity of theoretical frames, settings, and empirical methods. As a result, a disparate body of research has emerged, and while certain aspects have been addressed by numerous scholars, such as the effect of news media coverage on CEO pay (e.g., Core, Guay, & Larcker, 2008;Kang & Kim, 2017), investor composition (e.g., Barber & Odean, 2008;Kalay, 2015), and stock market-related variables (e.g., Peress, 2014;Tetlock, 2007Tetlock, , 2011, most research is relatively insular and only loosely tied together, leaving management scholars and practitioners with a patchy understanding of the media coverage of firms.…”

“…The topic of coverage denotes the substantive representation of a certain subject of coverage, as well as the specific information contained in the coverage. For example, studies compare coverage of the CEO with other coverage of a firm (Kang & Kim, 2017), examine consequences of news stories on the basis of their similarity with prior news (Tetlock, 2011), analyze differences between regular media coverage and awards bestowed by the media (Chatterjee & Hambrick, 2011), or compare coverage of different firm action types (Rindova et al, 2007).…”

Market Competition and the Effectiveness of Performance Pay

“…At the team and organization levels, scholars have considered the trade-off between individual and teamwide incentives (Hamilton et al 2003, Kretschmer and Puranam 2008, Pierce 2012, Bandiera et al 2013, access to incentive schemes (Friebel et al 2017), task interdependencies (Siegel and Hambrick 2005), and the communication of PfP schemes (Englmaier et al 2016) as moderators of PfP effectiveness. A number of studies indicate that PfP schemes work only when factors within the organization are favorable (Becker and Gerhart 1996, Elvira and Graham 2002, Tosi and Greckhamer 2004, Cobb and Lin 2017, Kang and Han Kim 2017. Factors outside the firm that may affect the impact of PfP remain largely unexplored.…”