Title: CEO compensation and operational risk

Authors: Khalid Al-Amri

Addresses: College of Economics and Political Science, Sultan Qaboos University, Muscat, P.O. Box 20, PC: 123, Oman

Abstract: This study examines the impact of operational risk on CEO compensation in the property-liability insurance industry. We find that property-liability CEOs are not penalised for operational risk in terms of cash-based compensation, while they are penalised in terms of their option-based compensation. Our findings also suggest that CEOs are largely insulated from firm level operational losses in terms of their total compensation. These findings have implications for implementing optimal risk-based contracting decisions for CEO compensation contracts.

Keywords: corporate governance; CEO compensation; operational risk; insurance industry; executive compensation; cash-based compensation; options-based compensation.

DOI: 10.1504/IJBIR.2017.082824

International Journal of Business Innovation and Research, 2017 Vol.12 No.4, pp.407 - 424

Received: 03 Jul 2014
Accepted: 27 Jan 2015
Published online: 13 Mar 2017 *

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