Director Influence

33 Pages Posted: 10 Dec 2014 Last revised: 10 Aug 2016

See all articles by Sjoerd van Bekkum

Sjoerd van Bekkum

Erasmus University

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Dan Zhang

Oslo and Akershus University College - Oslo Metropolitan University; BI Norwegian Business School

Date Written: August 8, 2016

Abstract

We use exogenous changes in the probability that firms adopt executive ownership guidelines (EOGs) to measure the influence of board connections on the spreading of executive compensation policy. EOGs require managers to hold pre-specified equity ownership levels, and their use has increased gradually from less than 5 percent of the largest US firms in 1992 to 73 percent in 2013. We use changes in state tax rates as a determinant of adopting EOGs and find that board connections are a significant channel through which EOGs disseminate. This finding highlights the dissemination of compensation policy through the influence exerted by the board of directors, and complements explanations based on similar firms adopting similar compensation policies.

Keywords: Executive compensation, executive compensation trends, board interlocks

JEL Classification: G34

Suggested Citation

van Bekkum, Sjoerd and Verwijmeren, Patrick and Zhang, Dan, Director Influence (August 8, 2016). Available at SSRN: https://ssrn.com/abstract=2535519 or http://dx.doi.org/10.2139/ssrn.2535519

Sjoerd Van Bekkum (Contact Author)

Erasmus University ( email )

P.O. Box 1738
Rotterdam, NL 3062 PA
Netherlands

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Dan Zhang

Oslo and Akershus University College - Oslo Metropolitan University ( email )

PO Box 4, St Olavs plass
Oslo, 0130
Norway

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.bi.edu/research/employees/?ansattid=A1210112

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