Personal life security, nonmonetary benefits and executive compensation : evidence from stand your ground laws

Abstract

People prefer an amenable location and companies have to pay a higher level of salary to their executives in a less livable place. Focusing on a particular aspect of livability, i.e. life security, we investigate whether life security condition in a region has an impact on CEOs’ compensation using the enactment of Stand Your Ground (SYG) laws in U.S. 26 states from 2003 to 2020 as an exogenous shock. SYG laws, which grant individuals the legal right to use lethal force in self-defense without the duty to retreat, have the potential to affect executives' perception of personal security and consequently, their compensation preferences. Building on a difference-in-difference approach, we find that the overall executive compensation package tends to increase following the enactment of SYG laws. On average, the passage of the SYG Laws increases total CEO compensation in firms headquartered in states adopting the laws by 3.2% relative to the increase of compensation in firms headquartered in states without adopting the laws. The results are more pronounced when firms face tougher competitiveness for talents and CEOs who have shorter tenure extract higher total pay and equity-based pay after the passage of the SYG Laws. In addition, we find that the results concentrate on regions with high crime rate, poor protective services, and high firearm ownership. This suggests that the adoption of such laws leads to a heightened concern for personal security among executives, prompting them to negotiate for additional benefits. This finding highlights the importance of personal life security in shaping executive compensation preferences.

Date of Award	17 Sept 2023
Original language	English
Awarding Institution	Lingnan University
Supervisor	Xiaofeng ZHAO (Supervisor) & Jingyuan LI (Co-supervisor)