ODA research seminar by Peter Schäfer, TU Dresden

The ODA Section invites you to an ODA research seminar by Prof. Dr. Peter Schäfer, TU Dresden

Human Frictions in CEO Pay

This study shows that CEOs who parent school-age children - a personal constraint that reduces bargaining power by limiting mobility and increasing the cost of accepting outside offers - earn significantly less. Using a panel of U.S. CEOs from 1992 to 2021, we find that total compensation of CEOs with at least one school-age child is approximately 17% lower than for otherwise similar CEOs. The effect emerges when the oldest child enters school and disappears when the youngest leaves, two events whose timing is predetermined by school policy. It increases with the number of school-age children, is present only among CEOs with outside options in the executive labor market and is partly reflected in a lower share of equity-based pay. The results are robust to CEO-firm fixed effects and to testing for alternative explanations based on effort or risk preferences. They indicate that boards price mobility-related personal constraints in CEO compensation and identify a child penalty that operates through bargaining power.

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