Characteristics of Compensation Committees and Non-Executive Compensation: Evidence from Taiwan

Abstract

Unequal pay has become a global threat to meeting the United Nations’ sustainability goals. Taiwan has been making efforts to eliminate the pay disparity between executives and employees by requiring Taiwan-listed firms to disclose the prior year’s average non-executive employee compensation. This study finds that compensation committee meetings and size are associated with a higher CEO-to-employee pay ratio. We further find that the labor practices and health sustainability issues on the U.S. SASB Materiality map strengthen the positive association between compensation committee size and the pay ratio. The results also reveal that the Employee Engagement, Diversity & Inclusion issues on the U.S. SASB Materiality map strengthen the positive relation between compensation committee meetings and the CEO-to-employee pay ratio. Our findings are of interest to the Taiwanese government and other governments with similar institutional environments. Our results are also important to investors and other stakeholders who can use this information to make investments and other related decisions.

Keywords: Compensation committee, voluntary, mandatory, compensation disclosure, U.S. SASB Materiality Map.