This paper examines complexity in CEO compensation contracts. We develop a measure of compensation complexity and provide empirical evidence that complexity has increased substantially over time. We document that complexity results not only from factors reflecting efficient contracting, but also from external pressures from compensation consultants, institutional investors, proxy advisors, and attempts to benchmark to peers, with these external factors having greater impact in more recent years. Examining consequences of contract complexity, we find an association with lower future firm performance that is related to the influence of external factors on compensation design. We further find this relation is partially mitigated when a contract's performance metrics are more highly correlated, consistent with information processing costs hampering decision-making. Collectively, these findings confirm concerns raised by investors and the media regarding compensation complexity and can inform boards in their design of CEO pay packages.

中文翻译：

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CEO薪酬方案的复杂性


本文探讨了首席执行官薪酬合同的复杂性。我们开发了一种衡量薪酬复杂性的方法，并提供了经验证据，证明复杂性随着时间的推移而大幅增加。我们证明，复杂性不仅源于反映有效签约的因素，还源于来自薪酬顾问、机构投资者、代理顾问的外部压力，以及对同行进行基准测试的尝试，这些外部因素近年来产生了更大的影响。通过检查合同复杂性的后果，我们发现与未来公司绩效较低之间存在关联，这与外部因素对薪酬设计的影响有关。我们进一步发现，当合同的绩效指标更加高度相关时，这种关系会部分缓解，这与阻碍决策的信息处理成本一致。总的来说，这些发现证实了投资者和媒体对薪酬复杂性提出的担忧，并可以为董事会设计首席执行官薪酬方案提供参考。