Do Qualifications Matter? New Evidence on Board Functions and Director Compensation

58 Pages Posted: 7 Oct 2013 Last revised: 16 Dec 2017

See all articles by Viktar Fedaseyeu

Viktar Fedaseyeu

China Europe International Business School (CEIBS)

James S. Linck

Southern Methodist University (SMU) - Finance Department

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; European Corporate Governance Institute (ECGI)

Date Written: November 25, 2017

Abstract

Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications affect the roles they perform on the board (board functions) and their compensation. On average, directors that are more qualified handle more board functions, resulting in higher pay, but this is not true for “co-opted” directors (joined the board after the CEO). However, co-opted directors are assigned more functions and receive higher pay on boards where the CEO’s influence is high. We also find that some firms award directors “discretionary compensation” (compensation that is unrelated to board functions), and that the likelihood of such compensation is correlated with CEO power. Overall, our evidence generates new insights into how director roles and financial incentives are allocated across directors, and the extent to which this allocation depends on CEO power.

Keywords: Boards of directors, Board duties, CEOs, Compensation, Qualifications, Outside directors

JEL Classification: G34, J30

Suggested Citation

Fedaseyeu, Viktar and Linck, James S. and Wagner, Hannes F., Do Qualifications Matter? New Evidence on Board Functions and Director Compensation (November 25, 2017). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2335584 or http://dx.doi.org/10.2139/ssrn.2335584

Viktar Fedaseyeu

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

HOME PAGE: http://https://www.ceibs.edu/fviktar

James S. Linck (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Hannes F. Wagner

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
807
Abstract Views
4,664
rank
36,236
PlumX Metrics