Inter-board pay differentials for directors with multiple appointments

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Issue Date
2012
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Authors
Farrell, Kathleen
Hersch, Philip L.
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Citation

Farrell K., and Hersch P.L. 2012. "Inter-board pay differentials for directors with multiple appointments". Applied Economics Letters. 19 (14): 1401-1404.

Abstract

We analyse uniformity in the market's valuation of director human capital by comparing director compensation across firms with and without director overlaps. We find that although there is less variation in director compensation for connected boards, which share a common director, than for unrelated boards, there remains a high variation in director compensation for directors with multiple directorships. We also find that active Chief Executive Officers (CEOs), on average, command higher total director compensation in subsequent board appointments. This result holds for appointments where the individual already holds two or more directorships and is counter to the prediction of a busy director effect. Overall, our evidence suggests that active CEOs are high-quality directors or have a high disutility of additional board work and are able to command higher compensation when added to subsequent boards.

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