(Reuters) – The compensation of U.S. CEOs rises sharply when their companies gain import restrictions against foreign competitors, according to a new research paper.
The study compared executive pay – both direct compensation and incentives – at over 1,000 U.S. companies between 1994 and 2015, before and after those firms won import restrictions through antidumping and countervailing duty orders. It found CEO compensation rose an average of 17% after the barriers were in place.
The study examined antidumping and countervailing duty measures, not the impact of tariffs like the ones at the center of President Donald Trump’s trade battles with China and other trade partners.
While much of the pay bump identified in the research comes in the form of added stock and options, it found salary and bonuses were also higher after the restrictions were implemented.
Brian Blank, the author and an assistant professor of finance at Mississippi State University’s College of Business, said he expected to find the increase was linked to improved financial performance by the company. After all, the barriers are designed to help companies fight off lower-priced foreign competition in their home markets, so it may be logical for company executives to be rewarded for better performance.
“But I didn’t find any evidence of better performance at these firms,” said Blank in an interview with Reuters.
His theory is that the CEOs become more powerful within their firms as result of successfully winning high-profile victories such as trade protection. “The firm, including members of the board determining compensation, might perceive that as a positive thing and reward the CEO for that,” he said.
Blank’s paper was published this week by the Mercatus Center at George Mason University in Arlington, Virginia.
Blank said he focused on antidumping and countervailing duty orders, rather than tariffs, because they have a larger impact on firms. He notes that, on average, antidumping and countervailing duty measures are eight times larger than tariffs.
“Tariffs haven’t been used as widely as dumping and countervailing duties,” he said, “and the magnitudes are much larger than the tariffs, at least until this current administration.”
Reporting by Timothy Aeppel; Editing by Andrea Ricci
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