30 Pages Posted: 22 Sep 2010 Last revised: 8 Jun 2012
Date Written: September 18, 2010
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: 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
By Kevin Murphy