The Labor Market for Corporate Directors
53 Pages Posted: 1 Oct 2015 Last revised: 2 Dec 2016
Date Written: February 2016
This paper empirically analyzes the labor market for corporate directors and the role compensation plays in this market. Since salaries are not individually negotiated with directors, preferences of directors and firms, rather than wages, determine market outcomes. I estimate preferences from a two-sided matching model and use them in counterfactual experiments. Increasing director pay by $150,000 a year per director allows less desirable firms to attract a better pool of directors. This result suggests that firms can effectively use compensation to build better boards. The framework developed here is used to analyze other important market segments, such as the market for CEO directors.
Keywords: Director labor market, director compensation, two-sided matching model, structural estimation
Suggested Citation: Suggested Citation