CEO Compensation and Board Structure Revisited
College of William and Mary - Mason School of Business
Hong Kong Polytechnic University
September 18, 2010
Journal of Finance, Vol. 67, No. 3, pp. 1149-1168, June 2012
Chhaochharia and Grinstein (JF, 2009) estimate that CEO pay decreases by 17% more in firms that were not compliant with the recent NYSE/NASDAQ board independence requirement than in firms that were compliant. We document that 74% of this magnitude is attributable to two outliers out of 865 sample firms. In addition, we find that the compensation committee independence requirement increases CEO total pay, particularly in the presence of effective shareholder monitoring. Our evidence casts doubt on the effectiveness of independent directors in constraining CEO pay as suggested by the managerial power hypothesis.
Number of Pages in PDF File: 30
Keywords: Executive Compensation, CEO Pay, Managerial Power, Board Structure, Board Independence, Corporate Governance, Compensation Committee, Sarbanes-Oxley, NYSE, Nasdaq
JEL Classification: G34, G38, J31, J33
Date posted: September 22, 2010 ; Last revised: June 8, 2012
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