Guoli Chen
This paper investigates the initial compensation package of new CEOs hired in turnaround situations. I argue that firms in turnaround situations pay their new CEOs more than do comparable firms that are not in turnaround situations, and that they tend to use a higher percentage of stock-based pay. Such relations are stronger for externally appointed CEOs. I further argue that higher pay attracts talented executives who are more capable, experienced, and well connected to acquire critical resources, and thus will improve post- succession performance. With 98 new CEOs hired in turnaround situations and 431 peers in non-turnaround situations, I find general support for my arguments. I discuss the implications of my study on CEO compensation, corporate governance and corporate turnaround literature.
INSEAD, Singapore 138676, 1 Ayer Rajah, Singapore
