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The Impact of Corporate Governance on Executive Compensation

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  • Stephen G. Sapp

Abstract

"This paper examines the relationship between the compensation of the top five executives at a set of over 400 publicly listed Canadian firms and various internal and external corporate governance-related factors. The media is full of stories suggesting a relationship between large executive compensation packages and failures in governance at various levels within organisations, but there exists little formal analysis of many of these relationships. Our analysis provides empirical evidence supporting some of these assertions, refuting others and documenting new relationships. We find that variances in internal governance related to differences across firms in the characteristics of the CEO, compensation committee and board of directors do influence both the level and composition of executive compensation, especially for the CEO. Considering external measures of corporate governance, we find that different types of shareholders and competitive environments impact executive compensation. We do not find that either the internal or external governance characteristics dominate". Copyright (c) 2008 The Author Journal compilation (c) 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Stephen G. Sapp, 2008. "The Impact of Corporate Governance on Executive Compensation," European Financial Management, European Financial Management Association, vol. 14(4), pages 710-746.
  • Handle: RePEc:bla:eufman:v:14:y:2008:i:4:p:710-746
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    References listed on IDEAS

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    Cited by:

    1. Kanapathippillai, Sutharson & Johl, Shireenjit K. & Wines, Graeme, 2016. "Remuneration committee effectiveness and narrative remuneration disclosure," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 384-402.
    2. Windsor, Duane, 2009. "Tightening corporate governance," Journal of International Management, Elsevier, vol. 15(3), pages 306-316, September.
    3. Andres, Christian & Fernau, Erik & Theissen, Erik, 2014. "Should I stay or should I go? Former CEOs as monitors," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 26-47.
    4. Brookman, Jeffrey T. & Thistle, Paul D., 2013. "Managerial compensation: Luck, skill or labor markets?," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 252-268.
    5. Habib Jouber & Hamadi Fakhfakh, 2011. "Does CEOs Performance-based Compensation Waits on Shareholders? A Cross National Analysis," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 2(3), pages 68-82, August.
    6. Anne M. Wilkins & Dana R. Hermanson & Jeffrey R. Cohen, 2016. "Do Compensation Committee Members Perceive Changing CEO Incentive Performance Targets Mid-Cycle to be Fair?," Journal of Business Ethics, Springer, vol. 137(3), pages 623-638, September.
    7. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.
    8. repec:kap:jmgtgv:v:21:y:2017:i:3:d:10.1007_s10997-016-9359-z is not listed on IDEAS
    9. Taylan Mavruk & Evert Carlsson, 2015. "How long is a long-term-firm investment in the presence of governance mechanisms?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 117-149, June.
    10. Habib Jouber, 2016. "The relationship between CEO performance-based compensation and shareholders value creation: a cross national analysis," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 8(1), pages 1-22.

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