ELEXENT | Optimistic executives get paid less

Optimistic executives get paid less


Optimistic executives get paid less

Posted by elexent in HR 19 Mar 2015

The optimistic bias influence people to see the future rosier than is realistic : they will live longer, make more money than average ; they feel they are less likely to lose their job or die in a car accident.
Optimistic CEOs tend to receive smaller stock options grants, fewer bonus payments and lower compensation than their peers.
Why? They overestimate the value of compensation claims that are contingent on successful outcomes, like the increase in the price of shares. When they have stock options, they will wait and not exercise them as soon as possible.

Pessimist CEOs are rewarded with higher compensation packages

Source : Otto, C. A. (2014), Journal of Financial Economics, “CEO optimism and Incentive Compensation”, November, vol. 114, n°2, pp. 366-404.

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