Corporate Governance When Founders are Directors
University of Michigan at Ann Arbor - Stephen M. Ross School of Business
Harvard Business School
December 23, 2010
Journal of Financial Economics, Forthcoming
We examine CEO compensation, CEO retention policies, and M&A decisions in firms where founders serve as a director with a non-founder CEO (founder-director firms). We find that founder-director firms offer a different mix of incentives to their CEOs than other firms. Pay for performance sensitivity for non-founder CEOs in founder-director firms is higher and the level of pay is lower than that of other CEOs. CEO turnover sensitivity to firm performance is also significantly higher in founder-director firms compared to non-founder firms. Overall, the evidence suggests that boards with founder-directors provide more high powered incentives in the form of pay and retention policies than the average U.S. board. Stock returns around M&A announcements and board attendance are also higher in founder-director firms compared to non-founder firms.
Number of Pages in PDF File: 51
Keywords: Founder, CEO compensation, CEO turnover, family firms, corporate governance, board of directors
JEL Classification: G3, G34working papers series
Date posted: August 23, 2010 ; Last revised: January 9, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.562 seconds