What a Difference a Day Makes (In Executive Compensation)

Accounting

Further details

Abstract

We document curious regularities in executive compensation related to the calendar. Firms using 52/53 week financial reporting conventions increase CEO pay in 53-week years, consistent with rewarding the CEO for working an additional week relative to the previous (52-week) year. However, firms do not appear to revert CEO compensation in the subsequent year when the CEO works 52 weeks again. We do not, however, detect an increase in executive pay in leap years for firms using a calendar-year reporting period. The 53-week findings are robust to controlling for the firms’ financial performance which prior literature documents is affected by longer reporting periods. We investigate whether corporate-governance-related initiatives (Say-On-Pay) and other corporate governance mechanisms moderate the additional week effect. We also consider whether CFO pay is similarly impacted by fiscal year length changes and find no evidence thereof.