A Survey of Recent Evidence on Boards of Directors and CEO Incentives

European Corporate Governance Institute – Finance Working Paper No. 652/2020

Asia-Pacific Journal of Financial Studies (2020) 49, 7-35.

54 Pages Posted: 31 Jan 2020 Last revised: 10 Mar 2020

See all articles by Ronald W. Masulis

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Date Written: January 28, 2020

Abstract

This article surveys the recent literature on boards of directors and the interplay between director incentives and CEO incentives. The primary focus is on how the incentives and other characteristics of directors, boards and CEOs interact to affect firm performance. The article reviews the recent evidence documenting a causal relationship between board independence and measures of firm performance. It also discusses the major limitations of the current measure of director independence. Finally, the article highlights how board independence provides strong incentives for CEOs to create firm value and examines the recent evidence on what other director characteristics improve board effectiveness.

Keywords: Boards, Directors, CEO Incentives, Independent Directors

JEL Classification: G34

Suggested Citation

Masulis, Ronald W., A Survey of Recent Evidence on Boards of Directors and CEO Incentives (January 28, 2020). European Corporate Governance Institute – Finance Working Paper No. 652/2020. Available at SSRN: https://ssrn.com/abstract=3520265 or http://dx.doi.org/10.2139/ssrn.3520265

Ronald W. Masulis (Contact Author)

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