Exploring the Relationship Between Peer Network Structure and CEO Compensation

CEO compensation is among the most controversial topics in strategic management research. Extant scholarly work and anecdotal evidence suggest that peer group comparisons may explain how boards of directors justify generous CEO compensation packages to organizational stakeholders. In this study, we extend research on CEO compensation by focusing on the structural positions of firms within the inter-firm compensation peer network. Specifically, using panel data comprised of 447 S&P 500 firms and 2036 firm-year observations covering the 2010–2015 period, we explore the relationship of a firm’s centrality and the structural holes it commands in a peer group network with CEO compensation. Using network theory and methodology, we find that firms that pay high levels of CEO compensation are subjected to a form of social distancing by industry peers, reducing the firm’s centrality in the peer network, while still commanding a network that is rich in structural holes. Moreover, results show that centrality and co...