For the study, researchers from the Fuqua School of Business at Durham, N.C.-based Duke University analyzed nearly 18,000 S&P 1500 data points from 1993-2015 to see if an association existed between CEO-picked CFOs and eventual CEO compensation.
With an average 10 percent increase in compensation observed, that means CEOs in the study who earned a median yearly pay package of $3.2 million would see $300,000 more than CEOs who kept the same CFO from their predecessor.
“CEOs ultimately have power over CFOs, arguably more so when the CEO played a role in hiring the CFO,” Bill Mayew, PhD, accounting professor at Fuqua and co-author of the study, said in a press release. “They may pressure CFOs to manage earnings to help the firm meet, or just barely beat, earnings targets from financial analysts. Those reported earnings and the response in stock prices can then drive up a portion of the CEO’s compensation based on the firm’s performance.”
Read the full news release here.
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