NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Are Energy Executives Rewarded For Luck?

Lucas W. Davis, Catherine Hausman

NBER Working Paper No. 25391
Issued in December 2018, Revised in March 2020
NBER Program(s):Corporate Finance, Environment and Energy Economics

In this paper, we examine executive compensation data from 78 major U.S. oil and gas companies over a 24-year period. Perhaps in no other industry are the fortunes of so many executives so dependent on a single global commodity price. We find that a 10% increase in oil prices is associated with a 2% increase in executive compensation. This oil price effect holds for both CEOs and non-CEOs and separately for several different individual components of compensation, including bonuses. We find that the oil price effect is larger in companies with more insiders on the board, and asymmetric, with executive compensation rising with increasing oil prices more than it falls with decreasing oil prices. We then discuss potential mechanisms drawn from the broader existing literature on executive compensation.

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Document Object Identifier (DOI): 10.3386/w25391

Published: Lucas W. Davis & Catherine Hausman, 2020. "Are Energy Executives Rewarded for Luck?," The Energy Journal, vol 41(01).

 
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