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Upper-echelon executive human capital and compensation: Generalist vs specialist skills

Authors

  • Sudip Datta,

    1. Department of Finance, School of Business Administration, Wayne State University, Detroit, Michigan, U.S.A.
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  • Mai Iskandar-Datta

    Corresponding author
    1. Department of Finance, School of Business Administration, Wayne State University, Detroit, Michigan, U.S.A.
    • Correspondence to: Mai Iskandar-Datta, Department of Finance, School of Business Administration, Wayne State University, 5201 Cass Avenue, Detroit, MI 48202, U.S.A. E-mail: mdatta@wayne.edu

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Abstract

This study extends current knowledge of upper echelon executive compensation beyond the CEO, specifically CFO compensation, based on whether they possess generalist or specialist skills. We find that “strategic” CFOs with an elite MBA (generalist) consistently command a compensation premium, while “accounting” CFOs (specialist) and CFOs with a non-MBA master's degree, even from an elite institution, do not. Further, scarce “strategic” CFOs are awarded both higher salaries and higher equity-based compensation. Our findings support the view that unique complementarities between scarce CFOs and firms increase these executives' bargaining power leading to pay premium. Our results are robust to post-hiring years, firm sizes, board characteristics, and CFO's insider/outsider status. We contribute at the confluence of upper-echelon compensation, executive human capital, resource-based view, and assortative matching literatures. Copyright © 2014 John Wiley & Sons, Ltd.

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