CEO Incentives and Diversity in the Boardroom and Compensation Committees

Purpose This study aims to examine whether compensation committees dominated by co-opted directors are less effective in mitigating the CEO horizon problem. Design/methodology/approach The author uses a sample of 7,280 firm-year observations from 1998 to 2011. Findings In this study, the author finds evidence of opportunistic research and development (R&D) reduction and accruals management in firms with retiring CEOs and compensation committees dominated by co-opted directors. Moreover, it is found that R&D reduction and income-increasing accruals are less discouraged when determining the compensation for retiring CEOs by compensation committees that are dominated by co-opted directors. The results suggest that compensation committees dominated by co-opted directors are less effective in adjusting CEO compensation to mitigate the CEO horizon problem. Originality/value The study reveals that co-opted directors are weak monitors. Moreover, the study adds empirical evidence to the debate of organizations’ CEO horizon problem. Finally, the study adds to the literature on corporate governance, revealing that compensation committees play an important role in mitigating an organization’s CEO horizon problem by adjusting CEO compensation.

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CEO Incentives and Product Development Innovation: Insights from Trademarks

SSRN Electronic Journal ◽

10.2139/ssrn.2585804 ◽

2015 ◽

Cited By ~ 4

Author(s):

Lucile Faurel ◽

Qin Li ◽

Devin M. Shanthikumar ◽

Siew Hong Teoh

Keyword(s):

Product Development ◽

Ceo Incentives

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CEO incentives and the cost of debt

Review of Quantitative Finance and Accounting ◽

10.1007/s11156-011-0230-7 ◽

2011 ◽

Vol 38 (3) ◽

pp. 323-346 ◽

Cited By ~ 29

Author(s):

Kenneth W. Shaw

Keyword(s):

Cost Of Debt ◽

Ceo Incentives ◽

The Cost

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Compensation Committees and CEO Compensation Incentives in U.S. Entrepreneurial Firms

Journal of Management Accounting Research ◽

10.2308/jmar.2004.16.1.35 ◽

2004 ◽

Vol 16 (1) ◽

pp. 35-56 ◽

Cited By ~ 61

Author(s):

Martin J. Conyon ◽

Lerong He

Keyword(s):

Ceo Compensation ◽

Theoretical Models ◽

Power Model ◽

Entrepreneurial Firms ◽

Compensation Committee ◽

Ceo Incentives ◽

Optimal Contracting ◽

Managerial Power ◽

Ceo Pay ◽

Contracting Model

This study uses a sample of IPO firms to investigate the relation between the compensation committee, CEO compensation, and CEO incentives. We investigate two theoretical models: the three-tier optimal contracting model and the managerial power model. We find support for the three-tier agency model. The presence of significant shareholders on the compensation committee (i.e., those with share stakes in excess of 5 percent) is associated with lower CEO pay and higher CEO equity incentives. Firms with higher paid compensation committee members are associated with greater CEO compensation and lower incentives. The managerial power model receives little support. We find no evidence that insiders or CEOs of other firms serving on the compensation committee raise the level of CEO pay or lower CEO incentives.

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