Executive signing bonuses are sizeable and increasing in use, and are labeled by the media as “golden hellos.” We find that executive signing bonuses are mainly awarded at firms with greater information asymmetry and higher innate risks, especially to younger executives, to mitigate the executives’ concerns about termination risk. When termination concerns are strong, signing bonus awards are associated with better performance and retention outcomes.
Corporate donations to charities affiliated with the board’s independent directors (affiliated donations) are large and mostly undetected due to lack of formal disclosure. Affiliated donations may impair independent directors’ monitoring incentives. CEO compensation is on average 9.4% higher at firms making affiliated donations than at other firms, and it is much higher when the compensation committee chair or a large fraction of compensation committee members are involved. We find suggestive evidence that CEOs are unlikely to be replaced for poor performance when firms donate to charities affiliated with a large fraction of the board or when they donate large amounts.
More specifically, we identify forced turnovers of college basketball and football head coaches. We focus on these events because over 40% of affiliated donations go to educational institutions and forced turnovers of college head coaches are very common—and often costly. Firing a coach for poor performance and revamping the team can cost millions of dollars (for an example of forced coach turnover.
Head coach terminations tend to happen after a prolonged period of poor performance, when advertisement revenue and alumni donations are below expectations. Under pressure to fundraise, independent directors who are affiliated with the universities greatly appreciate CEOs’ understanding and corporate contributions at these critical moments, and this appreciation may weaken their monitoring incentive. Importantly, college coach replacement is unlikely to be related to CEO compensation. It affects CEO compensation only via a firm’s decision to make affiliated donations in response to the increased demand for funding. Our instrumental variable regression shows that CEO compensation increases with affiliated donations predicted by forced turnovers of college coaches.
We examine the effects of Chinese import penetration on executive compensation of US firms. We find that import penetration reduces executives’ total compensation, stock grants, wealth-performance sensitivity, and opportunistic grant timing, suggesting that competition mitigates agency problems and the need for conventional alignment mechanisms. Furthermore, we find that import penetration increases option grants and option duration, thus incentivizing more innovation and risk-taking.