Presentation by Michael Jensen - Feb 22 10:30-12 B&E 330

Post date: Feb 18, 2019 10:6:44 PM

The Paradox of Awards: How Status Ripples Affect Who Benefits From CEO Awards

by Michael Jensen, Torsten Twardawski, Nadja Younes

Friday 22 Feb 2019 in room B&E 330 from 10:30-12:00

Distinguishing between status spillovers and status ripples, we argue that sudden positive status

shifts create status ripples when the social actors experiencing the status shifts are more

constrained from exploiting their higher status than the social actors to whom they are affiliated.

Specifically, we examine the status ripple paradox that the status effects experienced by the

affiliated actors sometimes are as strong, or even stronger, as the direct status effects experienced

by the ascending actors themselves. Focusing empirically on prestigious CEO awards from U.S.

news magazines, we examine the consequences of positive status shifts for the awarded CEOs

and the CEOs who are directors on the boards of directors of the awarded CEOs’ firms. We find

evidence of status ripples in CEO compensation by showing that awarded CEOs have relatively

greater immediate but smaller subsequent increases in compensation, which results in lower

overall compensation effects for the awarded CEOs. Moreover, we provide empirical evidence of

the theoretical mechanisms behind the status ripple paradox by showing that external constraint

in the form of increased media and analyst attention and increased expectations account for the

status ripple effect.

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