Is your surname remunerative? Surname favorability and CEO compensation

Abstract

We find that CEOs with more favorable surnames receive significantly higher compensation. The estimated effect of surname favorability is unique and incremental to the documented effects of various firm, board, and CEO characteristics. CEOs with French or German surnames receive significantly lower compensation after the French and German governments' opposition to the Iraq war. Surname favorability is not associated with corporate investments, disclosure policies, or firm performances. The results are more pronounced for professional (i.e., non-founder) or short-tenured CEOs and for firms with lower institutional ownership. Surname favorability reduces the likelihood of forced CEO turnover following poor stock performance but is not associated with a CEO's self-serving behaviors. Our results suggest that the effect of surname favorability is attributable to inefficient contracting by the board of directors. Our findings have implications for corporate stakeholders who have committed to the efficient contracting of CEO compensations.