Determinants of Director Compensation in Two-Tier Systems: Evidence from German Panel Data

Review of Managerial Science

CEFS Working Paper 06-2010

47 Pages Posted: 15 Oct 2009 Last revised: 30 Dec 2010

See all articles by Jörn Michael Andreas

Jörn Michael Andreas

University of Karlsruhe - Institute for Management

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Michael Wolff

University of Göttingen

Date Written: September 28, 2010

Abstract

Building on a unique panel data set of German Prime Standard companies for the period 2005-2008, this paper investigates the influencing factors of both director compensation levels and structure, i.e. the probability of performance-based compensation. Drawing on agency theory arguments and previous literature, we analyze a comprehensive group of determinants, including detailed corporate performance, ownership and board characteristics. While controlling for unobserved heterogeneity, we find director compensation to be set in ways consistent with optimal contracting theory. i.e., compensation is systematically structured to mitigate agency conflicts and to encourage effective monitoring. Thus, our results indicate that similar types of agency conflicts exist in the German two-tier setting.

Keywords: Director Compensation, Corporate Governance, Outside Directors, Two-tier System, Agency Costs

JEL Classification: J33, G30, G34

Suggested Citation

Andreas, Jörn Michael and Rapp, Marc Steffen and Wolff, Michael, Determinants of Director Compensation in Two-Tier Systems: Evidence from German Panel Data (September 28, 2010). CEFS Working Paper 06-2010. Available at SSRN: https://ssrn.com/abstract=1486325

Jörn Michael Andreas

University of Karlsruhe - Institute for Management ( email )

Kaiserstrasse 89
Karlsruhe, 76133
Germany

Marc Steffen Rapp

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Michael Wolff (Contact Author)

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
606
Abstract Views
2,371
rank
46,891
PlumX Metrics