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PRESS RELEASE – for immediate release

Optimistic CEOs are paid less

• For the first time, a study that measures CEO optimism through stock option exercise decisions and earnings forecasts shows that the more optimistic a CEO, the less they’ll get paid

Optimistic CEOs are paid less, according to new research from HEC Paris business school.

The report finds that executives with a positive outlook receive smaller stock option grants, fewer bonus payments, and lower total compensation than their more realistic peers because they overestimate the value of compensation components that depend on successful outcomes.

This means that they are often happy to accept smaller pay packages based on the assumption that stock options, in particular, will be worth more in the future than could reasonably be expected.

As a result, optimistic CEOs will wait to exercise their options, even if they’re ‘in the money’.

This is the first study to empirically examine how CEO beliefs are reflected in pay schemes. Looking at a sample of over 2,500 CEOs at 1,889 firms, Professor Clemens Otto studied the relation between CEO pay packages and the CEOs’ decisions on when to exercise stock options, combined with the difference between earnings per share (EPS) forecasts and actual earnings during the CEOs’ tenure.

Professor Otto says: “The findings show that companies could take advantage of overly optimistic CEOs and pay them less than they otherwise would.” – An interesting subversion of the theory that ‘fat-cat’ CEOs hold their firms to ransom on pay.


For more information, to request a copy of the study or to speak to Professor Otto, please contact Stephanie Mullins at BlueSky PR – or call +44 (0) 1582 790 706

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