The Impact Of Customer Satisfaction On Chief Marketing Officers Compensation

Abstract

As an intangible marketing asset, customer satisfaction is rarely apparent on financial statements. The contribution of customer satisfaction on firm financial performance is well documented, but it is unclear whether this positive link is reflected in executive compensation. Besides, executives are often compensated for short-term financial results but the outcome of marketing actions is rarely captured in a short horizon. This research seeks to determine if the compensation of Chief Marketing Officers (CMO), who is primarily responsible for marketing outcome, is impacted by customer satisfaction. We find that customer satisfaction has a significantly positive impact on the total cash compensation of CMO and its cash and bonus components when controlling for firm performance, firm size, and innovation. Overall, our results support the inclusion of nonfinancial performance measures, specifically customer satisfaction, in designing senior marketing executive compensation packages.