Foreign Experience and CEO Compensation

This paper investigates the relation between foreign experience and CEO compensation. Using a sample of large UK firms from the FTSE 350 index from 2003 to 2011, we find that foreign-born CEOs and national CEOs with foreign working experience receive significantly higher levels of total compensation compared to those without these characteristics. We document that this foreign-CEO pay premium is stronger in firms that are more globalized. The results are robust to controlling for firm-specific economic and corporate governance characteristics as well as the endogenous CEO selection using propensity score matching. Our results show that the foreign-CEO pay premium is attributed to specialized foreign expertise rather than broader general managerial skills.