Board Monitoring, Consulting, and Reward Structures

44 Pages Posted: 25 Jul 2007 Last revised: 26 Jan 2018

Date Written: February 3, 2010

Abstract

In general, board of directors’ compensation consists of stock option grants, equity stakes, meeting fees, and cash retainers. In this paper, we examine the short-term and long-term incentive effects of equity-based compensation on the board’s corporate governance (contracting and monitoring) and advisory (consulting) roles. We show that without short-term incentives, the board cannot effectively fulfill both roles. Providing the board with long-term incentives does help the advisory role, but, perhaps surprisingly, does not help with respect to the corporate governance role.

Keywords: board of directors, corporate governance, consulting, monitoring

JEL Classification: D80, G34, M40, J33

Suggested Citation

Drymiotes, George and Sivaramakrishnan, Shiva, Board Monitoring, Consulting, and Reward Structures (February 3, 2010). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1002667

George Drymiotes (Contact Author)

Texas Christian University ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817 257 5448 (Phone)

Shiva Sivaramakrishnan

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

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