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Institutional shareholding as a corporate governance mechanism that drives Chief Executive Officer pay.
- Source :
-
Business Research Quarterly . Jul2020, Vol. 23 Issue 3, p217-233. 17p. - Publication Year :
- 2020
-
Abstract
- We explore the effect of institutional directors on Chief Executive Officer (CEO) pay (total, fixed, and variable compensation). We delve particularly into the impact of pressure-sensitive and pressure-resistant institutional directors, who, respectively, represent institutional investors who maintain and investors who do not maintain a business relationship with the firm whose board they serve on. Focusing on CEO total pay, the findings show that institutional and pressure-resistant directors on boards behave similarly, affecting CEO total pay in a nonlinear way: as the presence of institutional and pressure-resistant directors on boards increases, the monitoring hypothesis prevails, and subsequently, better corporate governance decreases CEO total pay. However, when their presence on boards exceeds a critical point, the entrenchment hypothesis holds, thereby leading to an increase in CEO total pay. Contrary to our predictions, pressure-sensitive directors do not affect CEO total pay. Regarding the CEO's compensation structure (fixed and variable), the results suggest that institutional and pressure-resistant directors increase fixed compensation and reduce variable pay, while pressure-sensitive directors affect neither fixed nor variable compensation. This evidence supports the view that institutional directors should be considered as a heterogeneous collective. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 23409436
- Volume :
- 23
- Issue :
- 3
- Database :
- Academic Search Index
- Journal :
- Business Research Quarterly
- Publication Type :
- Academic Journal
- Accession number :
- 144863592
- Full Text :
- https://doi.org/10.1177/2340944420941462