Board compensation and ownership structure: empirical evidence for Italian listed companies |
| |
Authors: | Roberto Barontini Stefano Bozzi |
| |
Institution: | 1.Scuola Superiore Sant’Anna,Pisa,Italy;2.Catholic University “Sacro Cuore”,Rome,Italy |
| |
Abstract: | This paper investigates the relationships among corporate ownership, the level of board compensation, and firms’ future performance
within Italian listed companies. Board compensation could be related to corporate ownership characteristics, like the type
of controlling shareholder, ownership concentration, the separation between cash flow and voting rights, and the presence
of shareholders’ agreements. The evidence of high levels of board compensation associated with certain governance characteristics
could signal, in a principal-agent framework, rent extraction by entrenched managers or by controlling shareholders versus
minority shareholders; high board compensation, however, could be related to the need to hire directors with higher professional
standing and also to the desire to create a network with other companies through the enlargement of the board, according to
a social network view. In this paper we disentangle this issue showing the relationship between excess board compensation
and future performance: examining firms listed on the Milan Stock Exchange over the period 1995–2002, we show that board compensation
is linked to many governance characteristics, but excess compensation is never positively related to future performance. For
founder family firms, in particular, high board compensation is associated with (a) smaller board size; (b) higher proportion
of family members on the board; (c) lower future performance. The whole evidence therefore doesn’t support the hypothesis
suggested by the social network view, but is consistent with a rent extraction hypothesis. These results could add new empirical
evidence to the recent debate on the need for global remuneration reform. According to our results, some control mechanism
and an increase in transparency of executive compensation schemes could be appropriate. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|