Board Independence, Executive Pay Structures, and Pay Disclosure: Evidence from Europe
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4432-03.pdf
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275.79 KB
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Author(s)
Muslu, Volkan
Date Issued
February 6, 2004
Series/Report no.
MIT Sloan School of Management Working Paper;4432-03
Abstract
Using a broad sample of the largest European companies, I examine whether the two governance mechanisms, namely (i) independent monitoring by a board of directors and (ii) grants and disclosures of incentive-based executive pay, are substitutes for one another. I find that companies with proportionately more executives on their boards of directors grant greater incentive-based pay to their executives, and improve the transparency of their pay disclosure. The findings are consistent with the efficient contracting argument, which predicts that greater incentive-based pay and pay disclosure transparency mitigate agency problems generated by boards dependent upon management
Subjects
Board Independence
Compensation Structures
Pay Disclosure
International Corporate Governance
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