Perils of Limiting the Coverage of Mandatory Pay Disclosure: The Korean Experience

47 Pages Posted: 23 Aug 2018 Last revised: 21 Sep 2018

See all articles by Jinhyeok Ra

Jinhyeok Ra

Korea University Business School (KUBS)

Woochan Kim

Korea University Business School; European Corporate Governance Institute (ECGI); Asian Institute of Corporate Governance (AICG)

Date Written: September 2018

Abstract

This study documents the danger of limiting the coverage of mandatory pay disclosure. Exploiting the 2013 rule change in Korea, we find that its restrictive coverage, confined to board members with total annual pay exceeding 500 million Korean won, led a large fraction of executives to evade disclosure through deregistration (i.e., stepping down from the board) or pay-cuts. We also find that such evasion is mostly carried out by family executives in firms with high executive-to-worker pay ratios. If the original pay level is close to the threshold, we find that family executives choose pay-cuts over deregistration, as their preferred means of evasion.

Keywords: executive compensation, disclosure evasion, family executives, executive-to-worker pay ratio

JEL Classification: G32, G34, G38, J3, M48

Suggested Citation

Ra, Jinhyeok and Kim, Woochan, Perils of Limiting the Coverage of Mandatory Pay Disclosure: The Korean Experience (September 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 572/2018. Available at SSRN: https://ssrn.com/abstract=3234163 or http://dx.doi.org/10.2139/ssrn.3234163

Jinhyeok Ra

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea

Woochan Kim (Contact Author)

Korea University Business School ( email )

LG-POSCO Bldg #524
Anam-Dong, Seongbuk-Ku
Seoul, Seoul 136701
+822-3290-2816 (Phone)
+822-922-7220 (Fax)

HOME PAGE: http://biz.korea.ac.kr/professor/wckim

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Institute of Corporate Governance (AICG) ( email )

1, 5-ga, Anam-dong
Sungbuk-gu
Seoul, 136-701
Korea, Republic of (South Korea)

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