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.

中文翻译：

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在薪酬合同中使用非 GAAP 收益是否会导致 CEO 薪酬过高？有效的合同与管理权力

我们研究了公司在薪酬合同中使用非 GAAP 收益指标的近期趋势是否与有效合同假设或管理权力假设一致。我们从 2006 年至 2013 年标准普尔 500 指数公司的代理声明中的薪酬合同中提取非 GAAP 绩效指标。我们发现，在 CEO 薪酬合同中采用非 GAAP 收益与 CEO 的现金薪酬呈正相关。然而，CEO 薪酬的增长主要体现在 CEO 人才优秀的公司中。此外，我们发现采用非 GAAP 绩效指标后现金薪酬绩效敏感性（PPS）增加，表明董事会使用非 GAAP 绩效指标来增强 CEO 的绩效提升激励，而不是给予过多的薪酬。全面的，