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The compensation of busy directors: An international analysis

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  • Ferris, Stephen P.
  • Liao, Min-Yu (Stella)
  • Tamm, Chris

Abstract

Using international data from 49 countries, we examine how director busyness affects global compensation. Prior literature reports conflicting evidence regarding the effect that multiple directorships has on firm value and performance. Some studies find that busy directors have skills and connections that benefit the firm while other research concludes that busy directors are too distracted to provide adequate monitoring. We determine that busy directors receive higher total compensation which is consistent with their greater skills and extensive networks. Busy directors, however, receive a significantly higher percentage of equity-based compensation which is consistent with their limited time for monitoring. This compensation structure is associated with improved market-to-book ratios, ROA, and profit margins. Finally, we discover that compensation committee members do not receive higher total compensation, but a lower percentage is equity linked.

Suggested Citation

  • Ferris, Stephen P. & Liao, Min-Yu (Stella) & Tamm, Chris, 2018. "The compensation of busy directors: An international analysis," Research in International Business and Finance, Elsevier, vol. 46(C), pages 294-312.
    • Handle: RePEc:eee:riibaf:v:46:y:2018:i:c:p:294-312
    DOI: 10.1016/j.ribaf.2018.04.003
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    More about this item

    Keywords

    Governance; Boards; Busy; Compensation; Directors;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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