Determinants of CEO Compensation: Generalist Specialist Versus Insider Outsider Attributes
We examine the distinct effects of generalist specialist versus insider outsider attributes on Chief Executive Officer (CEO) compensation patterns. Our cross sectional results show that each attribute has a significant impact on both the level and structure of CEO compensation. CEOs with a high generalist outsider combination receive the highest total compensation, followed by generalist insiders, specialist outsiders, and finally specialist insiders. Our time series results show that the generalist specialist effect remains constant through time while the insider outsider effect diminishes over time. These findings suggest that the generalist premium is the result of a fundamental shift in the need for generalist skills to manage increasingly complex enterprises. In contrast, the outsider premium is more likely caused by a temporary increase in bargaining power during contract negotiations. Overall, our study disentangles generalist specialist attributes from insider outsider attributes and then identifies the specific channels through which each attribute affects executive compensation.