58 Pages Posted: 7 Oct 2013 Last revised: 17 Oct 2017
Date Written: October 6, 2017
Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications are reflected in their pay. We find significant variation in director compensation both across and within boards, with more than a third of the variation in director pay attributable to differences among members of the same board. On average, more qualified directors receive higher pay, while CEO-appointed (“co-opted”) directors do not. However, co-opted directors receive higher pay on boards where the CEO’s influence is high. We also provide evidence that the market values qualified directors and discounts co-opted ones.
Keywords: Boards of directors, Board duties, CEOs, Compensation, Qualifications, Outside directors
JEL Classification: G34, J30
Suggested Citation: Suggested Citation
Fedaseyeu, Viktar and Linck, James S. and Wagner, Hannes F., Do Qualifications Matter? New Evidence on Director Compensation (October 6, 2017). Available at SSRN: https://ssrn.com/abstract=2335584 or http://dx.doi.org/10.2139/ssrn.2335584