Skip navigation

Compensation of Outside Directors: An Empirical Analysis of Economic Determinants

Authors: Bryan, Stephen
Hwang, Lee-Seok
Lilien, Steven
Keywords: Director compensation;outside directors;director pension plan;incentive contracts;agency theory
Issue Date: Sep-2000
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

Files in This Item:
File Description SizeFormat 
SSRN-id244540.pdf175.94 kBAdobe PDFView/Open

Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.