Market comparison earnings and the bidding-up of executive cash compensation: Evidence from the United Kingdom

We argue that compensation committees will pay executives at least at the going rate and that deviations from that rate will influence subsequent pay, in a sample of large U.K. companies, we estimated whether asymmetric responses to pay anomalies explained executive pay. All three of our pay anomaly measures were statistically related to subsequent pay. Moreover, there was significant nonlinear adjustment toward the going rate for underpaid executives.