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CEO Compensation and Board Structure Revisited

30 Pages Posted: 22 Sep 2010 Last revised: 8 Jun 2012

Katherine Guthrie

College of William and Mary - Mason School of Business

Jan Sokolowsky

Independent

Kam-Ming Wan

Hong Kong Polytechnic University

Multiple version iconThere are 2 versions of this paper

Date Written: September 18, 2010

Abstract

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.

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

Suggested Citation

Guthrie, Katherine and Sokolowsky, Jan and Wan, Kam-Ming, CEO Compensation and Board Structure Revisited (September 18, 2010). Journal of Finance, Vol. 67, No. 3, pp. 1149-1168, June 2012. Available at SSRN: https://ssrn.com/abstract=1680476

Katherine Guthrie

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States
7572212832 (Phone)

Kam-Ming Wan

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong
(852) 2766-7053 (Phone)
(852) 2330-9845 (Fax)

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