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Do Qualifications Matter? New Evidence on Director Compensation

58 Pages Posted: 7 Oct 2013 Last revised: 17 Oct 2017

Viktar Fedaseyeu

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

James S. Linck

University of Georgia - Department of Banking and Finance

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: October 6, 2017

Abstract

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

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

Viktar Fedaseyeu

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy
+390258365283 (Phone)
+390258365283 (Fax)

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

James S. Linck (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Cox School of Business
Dallas, TX 75275
United States
214-768-3933 (Phone)

HOME PAGE: http://cox.smu.edu

Hannes F. Wagner

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://faculty.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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