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|Title:||Compensation of Outside Directors: An Empirical Analysis of Economic Determinants|
|Keywords:||Director compensation;outside directors;director pension plan;incentive contracts;agency theory|
|Series/Report no.:||April Klein-4|
|Abstract:||Little is known about the economic environments and determinants of the compensation arrangements for outside board members. As delegated monitors of corporate management, board members act as shareholders' agents. Thus, a potential for misaligned interests exists, requiring in turn incentive arrangements that are incentive-compatible and individually rational. We study the economic determinants of both the levels and mix of compensation for outside board members. We also examine the effects of the existence of a director pension plan on the relation between director compensation and the hypothesized determinants. In sum, and contrary to criticism that the board of directors is often a passive, ineffective entity that dislikes conflict with incumbent management, we find that board compensation is structured to mitigate agency problems inherent in firms whose management control is separated from ownership.|
|Appears in Collections:||Accounting Working Papers|
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