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Social elites on the board and executive pay in developing countries: Evidence from Africa

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  • Hearn, Bruce
  • Strange, Roger
  • Piesse, Jenifer

Abstract

This study applies a new multi-focal actor-centered institution-theoretic approach to examine the association between executive pay and the recruitment of social elites to the board of directors in developing countries. We use a sample of 119 initial public offerings (IPOs) from 17 African stock markets to model this relationship. The results suggest that a higher proportion of elites on the board is associated with lower executive pay. This is moderated by institutional quality; that is, lower institutional quality is associated with more directors drawn from social elites and with higher pay, while the opposite is true in higher-institutional-quality environments. Our findings confirm the importance of the social environment within which governance is embedded.

Suggested Citation

  • Hearn, Bruce & Strange, Roger & Piesse, Jenifer, 2017. "Social elites on the board and executive pay in developing countries: Evidence from Africa," Journal of World Business, Elsevier, vol. 52(2), pages 230-243.
    • Handle: RePEc:eee:worbus:v:52:y:2017:i:2:p:230-243
    DOI: 10.1016/j.jwb.2016.12.004
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