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The Impact of Corporate Reputation Ratings on CEO Compensation Under Diverse Economic Conditions

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Abstract

Although it is assumed that CEOs attempt to use corporate reputation ratings to justify increases in their annual compensation, controversy persists on the relationship between corporate reputation ratings and CEO compensation. Based on agency theory and signaling theory, we predict a positive relationship between corporate reputation ratings and CEO compensation but only during periods of economic recovery. Using a subset of Fortune’s “Most Admired” companies, this study demonstrates that corporate reputation ratings are significantly associated with CEO compensation during periods of economic recovery but not during periods of economic recession, after controlling the potential extraneous factors that may influence CEO pay.

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  1. Rohrer College of Business, Rowan University, 201 Mullica Hill Road, Glassboro, NJ, 08028, USA

    Joel Rudin & Jooh Lee

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  1. Joel Rudin
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  2. Jooh Lee
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Correspondence to Joel Rudin.

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Rudin, J., Lee, J. The Impact of Corporate Reputation Ratings on CEO Compensation Under Diverse Economic Conditions. Corp Reputation Rev 24, 117–127 (2021). https://doi.org/10.1057/s41299-020-00095-0

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