Abstract

http://ssrn.com/abstract=1736626
 
 

Citations (7)



 


 



Corporate Governance When Founders are Directors


Feng Li


University of Michigan, Stephen M. Ross School of Business

Suraj Srinivasan


Harvard Business School

December 30, 2010

Journal of Financial Economics, Vol. 102, No. 2, pp. 454-469, November 2011

Abstract:     
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: CEO Compensation, CEO Turnover, Founder, Corporate Governance, Board of Directors

JEL Classification: G3, G34

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Date posted: January 8, 2011 ; Last revised: November 24, 2011

Suggested Citation

Li, Feng and Srinivasan, Suraj, Corporate Governance When Founders are Directors (December 30, 2010). Journal of Financial Economics, Vol. 102, No. 2, pp. 454-469, November 2011. Available at SSRN: http://ssrn.com/abstract=1736626

Contact Information

Feng Li
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
Suraj Srinivasan (Contact Author)
Harvard Business School ( email )
Soldiers Field
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=10700
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