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Do Directors Perform for Pay?

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Author Info
Adams, Renée B.
Ferreira, Daniel

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Abstract

Many corporations reward their outside directors with a modest fee for each board meeting they attend. Using two non-overlapping data sets on director attendance behavior, we provide robust evidence that directors are less likely to have attendance problems at board meetings when board meeting fees are higher. This is suprising since meeting fees, on average roughly $1,200, represent an arguably small fraction of the total wealth of a representative director in our samples. Thus, corporate directors appear to perform for even very small financial rewards. We also find that firms that do not pay meeting fees appear to pay each of their directors approximately $40,000 more than firms that pay meeting fees. This suggests that firms that ignore meeting fees as an incentive device have a tendency to overpay their directors.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13504/1/wp2005-2a.pdf
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Publisher Info
Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2005-2.

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Length: 47 p.
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:hit:hitcei:2005-2

Note: This Version: April 6, 2004
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Related research
Keywords: Directors; Executive Compensation; Incentives; Attendance; Board Meetings;

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

References listed on IDEAS
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    Other versions:
  4. Renee Adams & Hamid Mehran, 2003. "Is corporate governance different for bank holding companies?," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 123-142. [Downloadable!]
  5. Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, vol. 58(3), pages 1087-1112, 06. [Downloadable!] (restricted)
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  8. David Yermack, 2004. "Remuneration, Retention, and Reputation Incentives for Outside Directors," Journal of Finance, American Finance Association, vol. 59(5), pages 2281-2308, October. [Downloadable!] (restricted)
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  16. Vafeas, Nikos, 1999. "Board meeting frequency and firm performance," Journal of Financial Economics, Elsevier, vol. 53(1), pages 113-142, July. [Downloadable!] (restricted)
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  19. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough Or Don'T Pay At All," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 791-810, August. [Downloadable!] (restricted)
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  21. Shleifer, Andrei & Vishny, Robert W, 1988. "Value Maximization and the Acquisition Process," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 7-20, Winter. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Adams, Renﾃｩe B. & Ferreira, Daniel, 2008. "Women in the Boardroom and Their Impact on Governance and Performance," CEI Working Paper Series 2008-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Gennaioli, Nicola & Rossi, Stefano, 2008. "Judicial Discretion in Corporate Bankruptcy," CEI Working Paper Series 2008-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  3. Renée B. Adams & Hamid Mehran, 2008. "Corporate performance, board structure, and their determinants in the banking industry," Staff Reports 330, Federal Reserve Bank of New York. [Downloadable!]
  4. Gennaioli, Nicola & Rossi, Stefano, 2008. "Optimal Resolutions of Financial Distress by Contract," CEI Working Paper Series 2008-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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