LAUSR

Chief executive officer (CEO) retirement pension plans are known as sustainable compensation because they induce managers to make more sustainable and long-term-oriented corporate decisions. We focused on the role of institutional investors in awarding CEO pension plans. Long-term and short-term institutional investors are expected to increase and decrease the CEO pension plan, respectively, wherein the former is aimed at persuading the manager to focus more on the firm’s long-term performance and the latter is aimed at making the CEO assume more risk. We empirically tested our hypothesis and found significantly negative (positive) relationship between short-term (long-term) institutional ownership and CEO pension plans, which is consistent with our hypothesis. Our results suggest the institutional ownership horizon’s differing impact on managers’ sustainable compensation structure.