Executive Directors' Pay, Networks and Operating Performance: The Influence of Ownership Structure

58 Pages Posted: 20 Oct 2008 Last revised: 20 Jun 2015

See all articles by Rafel Crespí-Cladera

Rafel Crespí-Cladera

Universitat Illes Balears (UIB), Dep. Economia i Empresa

Bartolomé Pascual-Fuster

Dep. Economia de la Empresa, Universitat Illes Balears (UIB)

Date Written: August 16, 2012

Abstract

This paper examines how ownership structure affects the director networking-compensation relationship. Furthermore, we measure the subsequent impact of this relationship on future operating performance of firms. As in previous research, our study also finds empirical evidence suggesting that higher network activity of executive directors conveys to larger compensation figures. Our data set of Spanish listed companies, with high average ownership concentration, show that this compensation is higher for firms with dispersed ownership than for firms with concentrated ownership. Also, the relationship of overcompensation with future operating performance is contingent on the ownership structure.

The implications for executive directors are that networking leads to higher compensation. For dispersed ownership firms, the consequence is that promoting executive networking could be harmful unless other corporate governance mechanisms prevent this outcome. For concentrated ownership firms, this structure allows to capture increases in operating performance. Finally, policy recommendations on corporate governance regulation are that self-regulation is better than imposing the same limit on the number of directorships to all firms if an effective control mechanism operates. Our results suggest that the presence of controlling owners is a strong corporate governance mechanism.

Keywords: Corporate Governance, Executive Compensation, Social Networks, Ownership Structure

JEL Classification: G30, G34

Suggested Citation

Crespi-Cladera, Rafel and Pascual-Fuster, Bartolomé, Executive Directors' Pay, Networks and Operating Performance: The Influence of Ownership Structure (August 16, 2012). Journal of Accounting and Public Policy. Vol 34, 175-203. 2015., Available at SSRN: https://ssrn.com/abstract=1287100 or http://dx.doi.org/10.2139/ssrn.1287100

Rafel Crespi-Cladera

Universitat Illes Balears (UIB), Dep. Economia i Empresa ( email )

Crta. de Valldemossa km 7, 5
07071 Palma Mallorca
Spain
+34 971 173273 (Phone)
+34 971 173426 (Fax)

Bartolomé Pascual-Fuster (Contact Author)

Dep. Economia de la Empresa, Universitat Illes Balears (UIB) ( email )

Ctra. de Valldemossa km 7,5
Palma, Baleares 07122
Spain
+34 971 172652 (Phone)
+34 971 172389 (Fax)

HOME PAGE: http://www.uib.es/depart/deeweb/pdi/hdeebpf0/tomeupascual/index-personal.htm

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
232
Abstract Views
1,378
rank
144,325
PlumX Metrics