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We show how chief executive officer (CEO) inside debt holdings affect corporations' labor investment behavior. We empirically find a positive association between CEO inside debt holdings shown to increase their conservatism and long-term horizons due to deferred payments and labor investment efficiency recognized as an integral factor in a firm's long-term survival and growth. Additional analyses reveal that CEO inside debt holdings lead to a greater tendency to reduce net hiring amid excess labor availability than is observed when levels are optimal. This tendency is especially marked when CEO power is strong and when the firm has relatively high financial liquidity and leverage. thus, equal to the debt-to-equity ratio of the firm, as the CEO's equity-like compensation serves to align the CEO's benefits with those of shareholders, and the debt-like compensation matches the CEO's incentives with those of creditors (Jensen and Meckling, 1976;Edmans and Liu, 2010). Many researchers report that equity-based compensation induces managers to serve shareholders better and maximize firm value (Murphy, 1985; Morck et al.Brockman et al., 2010). For example, Lambert and Larcker (1987) find that managerial compensation is related to shareholder wealth during acquisitions, and Low (2009) suggests that equity-based compensation makes managers reduce firm risk, which, in turn, affects shareholder wealth.CEOs' debt-based compensation has received less attention than CEOs' equity-based compensation in the compensation literature because a firm does not issue debt in the form of loans or bonds to pay CEOs' debt-based compensation, unlike in equity-based compensation. However, many recent studies have shed light on CEO pensions as an example of debt-based compensation. The CEO pension is recorded as a liability when its payment is determined and when it is implemented in the long-term future. These characteristics correspond to debt and allow the CEO pension to be defined as inside debt (Kwak and Mo, 2018). A CEO pension or inside debt can induce the manager to focus on the possibility of default or deadweight losses, as s/he may not receive her/ his pension payment if the firm does not survive over the long term. Thus, greater inside debt holdings are expected to make the manager more conservative and long-term oriented, whereas equity holdings will make the manager seek higher risk and short-term performance (Jensen and Meckling, 1976;Sundaram and Yermack, 2007;Edmans and Liu, 2010;Wang et al., 2010;Cassell et al., 2012). The empirical evidence shows that firms with higher CEO pensions go bankrupt less frequently (Sundaram and Yermack, 2007), bear lower costs of debt and higher costs of equity Wei and Yermack, 2011;Anantharaman et al., 2013), participate in less risky investments and try to maintain higher financial liquidity (Cassell et al., 2012), engage in less mergerand-acquisitions activity (Phan, 2014), and adopt more conservative accounting practices (Chen et al., 2010;Wang et al., 2010). Inside debt holdings are also sho...

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.