CEO Careers in Regulated Environments: Evidence from Electric and Gas Utilities

Abstract

anonymous referee, and seminar participants at the University of Texas at Austin for helpful We compare CEOs of electric and gas utility firms to CEOs of unregulated firms. Utility CEOs tend to be older when appointed to office, have less prestigious educational backgrounds, and are more likely to have a legal background. Despite these differences, the evidence also indicates that the likelihood of utility CEO turnover is at least as sensitive to stock performance as the likelihood of turnover among CEOs of unregulated firms. We find no convincing evidence that utility CEOs stay in office longer than their unregulated counterparts, although they are less likely to be overtly forced from office or replaced by an executive from outside the firm. Finally, the evidence suggests that regulatory expertise is valued in the selection of new The impact of regulation on executive employment contracting has been the subject of considerable research. However, we still have a relatively incomplete picture of how regulation affects managerial labor markets. For example, while recent studies indicate that CEOs of regulated firms are typically paid less than their counterparts at unregulated firms and that the