CEO Compensation and Board Structure – Rejoinder

Abstract

In their reply to our critique, Chhaochharia and Grinstein (2012) suggest that (i) Apple is a prime example of how board regulations affect CEO pay and should therefore not be excluded from the study, and (ii) their original results are robust to excluding the outliers when extending the pre-event sample period from 2000 to 2002 back to 1996. In this rejoinder, we (i) dispute that Apple is a fitting example to illustrate the causal effect of board independence on CEO pay, (ii) caution against drawing conclusions about the robustness of the results from the new regression results in the reply (e.g., due to lack of relevance, sample selection issues, and more outlier effects), and (iii) argue that important omissions in the reply cast further doubt on the conclusions advocated by CG. In a nutshell, the existing evidence simply does not support the view that mandated board independence helps rein in executive compensation.