Does the use of non‐GAAP earnings in compensation contracts lead to excessive CEO compensation? Efficient contracting versus managerial power
研究2006-2013年标普500公司薪酬合同中非GAAP业绩指标的使用，发现其与CEO现金薪酬正相关，但主要出现在高才能CEO的公司，且薪酬-业绩敏感性提高，支持有效契约假说。
Abstract We examine whether the recent trend of firms’ using non‐GAAP earnings metrics in compensation contracts is consistent with the efficient contracting hypothesis or the managerial power hypothesis. We extract non‐GAAP performance metrics from compensation contracts in proxy statements of S&P 500 firms from 2006 to 2013. We find that the adoption of non‐GAAP earnings in CEOs’ compensation contracts is positively associated with CEOs’ cash compensation. However, the increase in CEOs’ compensation is primarily evident among firms with superior CEO talent. In addition, we find that the cash pay‐performance sensitivity (PPS) increases after the adoption of non‐GAAP performance measures, suggesting that boards use non‐GAAP performance measures to enhance CEOs’ performance‐improving incentives, rather than granting excessive compensation. Overall, our evidence suggests that, on average, the use of non‐GAAP performance metrics in executive compensation contracts reflects boards’ efforts to retain talented CEOs and mitigate agency problems, which is consistent with the efficient contracting hypothesis.