OLD Media Moves

Exec comp stories: Media is ignored

March 23, 2006

Since we’re in the middle of proxy season, it’s interesting to note the latest research from some University of Pennsylvania business school professors, with help from a Stanford University professor, about the impact of executive compensation stories in the media. The study was released on Wednesday.

The B-school professors raise the issue of proper executive compensation coverage in the media in a recent article titled, “The Power of the Pen and Executive Compensation.” What models, they ask, are used by the media “to select CEOs for negative articles about their compensation, and do firms and managers find this attention sufficiently costly that they respond by making changes to their compensation policies?”

Models? They actually think that newsrooms operate under some sort of quantitative analysis?

Executive compensationThe results of their study discover that there is NO, repeat NO, effect of negative media coverage on high executive compensation. Kind of deflates those big business journalism egos, doesn’t it? We like to think we’re the agents of change.

Based on a review of 15,000 articles about executive compensation written between 1994 and 2002, the researchers discovered that negative publicity over compensation is more intense at larger companies and poorly-performing ones. They interpret this as a sign that the press is hyping the news to appeal to as broad a readership as possible.

As for the lasting impact of bad press on CEO compensation, the authors find “mixed evidence” that it motivates firms to substantially change their compensation practices. In general, it does not prompt drastic cutbacks in compensation because CEO compensation decisions are “largely insensitive” to negative publicity, they note.

Lastly, the professors found a number of examples of CEOs who received exorbitant amounts when it came to executive pay, yet were the recipients of little coverage in the media.

Read about the study here. It certainly makes a business journalist wonder why he or she is paying so much attention to proxy statements and executive compensation.

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