Article1994

Board control and ceo compensation

821 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Abstract The board of directors has been identified as a key internal control mechanism for setting CEO compensation. Theory suggests that CEOs will attempt to circumvent board control in an effort to maximize salary. This hypothesis was tested using a sample of 193 firms in a cross‐section of industries. Corporate governance literature was reviewed to develop a multiple indicator measure of board control. Although, as hypothesized, CEO salaries were greater in firms with lower levels of control, CEO compensation was not significantly related to firm size or profitability.

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References

1983Separation of Ownership and Control 1989Structural Equations with Latent Variables 1991Structural Equations with Latent Variables.1989Agency Theory: An Assessment and Review 1980Agency Problems and the Theory of the Firm 1986Large Shareholders and Corporate Control 1990Performance Pay and Top-Management Incentives 1988Outside directors and CEO turnover

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