Generalists versus Specialists: Managerial Skills and CEO Pay

Claudia Custodio, Miguel A. Ferreira, Pedro P. Matos
2010 Social Science Research Network  
We show that compensation is higher for CEOs with more general managerial skills using detailed biographic information on CEOs of the S&P 1,500 firms in 1993-2007. This relation is driven by managers' industry mobility and past experience as a top manager and is robust to the inclusion of firm-and CEO-level controls, including fixed effects. Comparing the actual CEO's pay to the pay of a portfolio of CEOs who are specialists in the industries that match the CEO's past industry experience
more » ... y experience implies a 10% pay premium to generalists. Furthermore, we provide evidence that pay increases the most when firms hire a new CEO from outside the firm and switch from a specialist to a generalist manager. Our findings suggest that an increase in the importance of general human capital relative to firm-specific human capital helps to explain the increase in executive pay. JEL Classification: G34, J24, J33
doi:10.2139/ssrn.1670243 fatcat:b532uqafzrgtxd65dbtnzmssf4