Are Fat Cats Copycats? Evidence from Director and Consultant Network Dynamics

51 Pages Posted: 31 Aug 2016 Last revised: 6 Jan 2017

See all articles by André Gygax

André Gygax

University of Melbourne - Department of Finance

Matthew Hazledine

University of Melbourne - Department of Finance

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Date Written: December 26, 2016

Abstract

Prior literature identifies great similarity in executive compensation packages of firms and has succeeded in hypothesizing but not in substantiating the responsible channel or channels. We introduce dynamic stochastic network techniques to directly analyze the following three possible channels simultaneously for the first time: sharing directors, sharing compensation consultants, and sharing industry membership. Using the dynamic technology, we show that package similarity is achieved by sharing directors and industry membership rather than by sharing compensation consultants. Moreover, boards with fewer females are more likely to include higher proportions of options compensation, and higher fixed compensation deters tie formation.

Keywords: Board interlocking network, executive compensation package design, selection, imitation, compensation consultants

JEL Classification: G31, G32

Suggested Citation

Gygax, André and Hazledine, Matthew and Martin, J. Spencer, Are Fat Cats Copycats? Evidence from Director and Consultant Network Dynamics (December 26, 2016). 2nd Annual Financial Institutions, Regulation and Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=2832531 or http://dx.doi.org/10.2139/ssrn.2832531

André Gygax

University of Melbourne - Department of Finance ( email )

Faculty of Business and Economics
Parkville, Victoria 3010
Australia

Matthew Hazledine

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

J. Spencer Martin (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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