Illusory correlation in the remuneration of chief executive officers: It pays to play golf, and well

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Kolev, Gueorgui I.; Hogarth, Robin. Illusory correlation in the remuneration of chief executive officers: It pays to play golf, and well. 2008
http://hdl.handle.net/10230/4573
To cite or link this document: http://hdl.handle.net/10230/4573
dc.contributor.author Kolev, Gueorgui I.
dc.contributor.author Hogarth, Robin
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2008-12-01
dc.identifier.uri http://hdl.handle.net/10230/4573
dc.description.abstract Illusory correlation refers to the use of information in decisions that is uncorrelated with the relevant criterion. We document illusory correlation in CEO compensation decisions by demonstrating that information, that is uncorrelated with corporate performance, is related to CEO compensation. We use publicly available data from the USA for the years 1998, 2000, 2002, and 2004 to examine the relations between golf handicaps of CEOs and corporate performance, on the one hand, and CEO compensation and golf handicaps, on the other hand. Although we find no relation between handicap and corporate performance, we do find a relation between handicap and CEO compensation. In short, golfers earn more than non-golfers and pay increases with golfing ability. We relate these findings to the difficulties of judging compensation for CEOs. To overcome this – and possibly other illusory correlations – in these kinds of decisions, we recommend the use of explicit, mechanical decision rules.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1132
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Illusory correlation in the remuneration of chief executive officers: It pays to play golf, and well
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:23Z
dc.subject.keyword Behavioral and Experimental Economics
dc.subject.keyword illusory correlation
dc.subject.keyword executive compensation
dc.subject.keyword golf handicaps
dc.subject.keyword decision rules
dc.subject.keyword leex
dc.rights.accessRights info:eu-repo/semantics/openAccess


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