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Shareholder Rights, Boards, and CEO Compensation


Rüdiger Fahlenbrach


Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute
January 2009

Review of Finance, Vol. 13, Issue 1, pp. 81-113, 2009

Abstract:     
I analyze the role of executive compensation in corporate governance. As proxies for corporate governance, I use board size, board independence, CEO-chair duality, institutional ownership concentration, CEO tenure, and an index of shareholder rights. The results from a broad cross-section of large U.S. public firms are inconsistent with recent claims that entrenched managers design their own compensation contracts. The interactions of the corporate governance mechanisms with total pay-for-performance and excess compensation can be explained by governance substitution. If a firm has generally weaker governance, the compensation contract helps better align the interests of shareholders and the CEO.

Keywords: G32, G34, J33

Accepted Paper Series


Date posted: January 17, 2009  

Suggested Citation

Fahlenbrach, Rüdiger, Shareholder Rights, Boards, and CEO Compensation (January 2009). Review of Finance, Vol. 13, Issue 1, pp. 81-113, 2009. Available at SSRN: http://ssrn.com/abstract=1328778 or http://dx.doi.org/rfn011

Contact Information

Rüdiger Fahlenbrach (Contact Author)
Ecole Polytechnique Fédérale de Lausanne ( email )
Quartier UNIL-Dorigny
Extranef 211
1015 Lausanne, CH-1015
Switzerland
++41-21-693-0098 (Phone)
++41-21-693-3010 (Fax)
HOME PAGE: http://sfi.epfl.ch/fahlenbrach.html
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

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