Countermove: how CEOs respond to post-acquisition compensation adjustments |
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| Authors: | John S Marsh William J Wales Fariss-Terry Mousa Rachel Graefe-Anderson |
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| Institution: | 1.College of Business,University of Mary Washington,Fredericksburg,USA;2.School of Business,University at Albany, SUNY,Albany,USA;3.Department of Management,James Madison University,Harrisonburg,USA;4.Smeal College of Business,The Pennsylvania State University,University Park,USA |
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| Abstract: | Following poorly performing acquisitions, the board of directors often redesigns the CEO’s annual compensation package to include less risk-encouraging stock options and more risk-discouraging restricted stock. This study explores the emerging area of post-acquisition compensation management and proposes that CEOs can indirectly, but effectively, defend against compensation rebalancing. Specifically, we find that CEOs may counteract the effects of compensation rebalancing by delaying the exercise of existing stock option holdings. Fortunately, this insight also offers valuable implications including the ability of the board to limit the CEO’s defense by adjusting stock option exercise windows. |
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