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

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• dc.contributor.author Kolev, Gueorgui I.ca
• dc.contributor.author Hogarth, Robin M.ca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:50:12Z
• dc.date.available 2017-07-26T10:50:12Z
• dc.date.issued 2008-12-01
• dc.date.modified 2017-07-23T02:12:20Z
• 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.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1132
• dc.identifier.uri http://hdl.handle.net/10230/4573
• 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.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• 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.subject.keyword Behavioral and Experimental Economics
• dc.title Illusory correlation in the remuneration of chief executive officers: It pays to play golf, and wellca
• dc.type info:eu-repo/semantics/workingPaper