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Further Evidence on Compensation Committee Composition as a Determinant of CEO Compensation

Author

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  • Nikos Vafeas

Abstract

I use more than 1,500 firm-year observations for 271 US firms between 1991-1997 to examine the relation between insider membership in compensation committees and CEO pay. I find a steady decline in the number of committees with insider participation during the sample period, and uncover some opportunism by insiders in setting pay prior to the compensation disclosure and tax reforms. Finally, I document changes in pay practices that would be consistent with the intent of these reforms. Based on this evidence, however, I cannot definitively conclude whether the reforms were efficient.

Suggested Citation

  • Nikos Vafeas, 2003. "Further Evidence on Compensation Committee Composition as a Determinant of CEO Compensation," Financial Management, Financial Management Association, vol. 32(2), Summer.
  • Handle: RePEc:fma:fmanag:vafeas03
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    Cited by:

    1. repec:eee:jocaae:v:10:y:2014:i:1:p:59-75 is not listed on IDEAS
    2. Charles Piot, 2006. "Les déterminants de l’existence et de l’indépendance managériale des comités de rémunération et de sélection en France," Revue Finance Contrôle Stratégie, revues.org, vol. 9(2), pages 159-185, June.
    3. Sharma, Vineeta, 2011. "Independent directors and the propensity to pay dividends," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1001-1015, September.
    4. Charles Piot, 2005. "Les Comités De Rémunération Et De Sélection Sont-Ils Perçus Comme Des Mécanismes De Contrôle En France ?," Post-Print halshs-00581273, HAL.
    5. Boyle, Glenn & Roberts, Helen, 2013. "CEO presence on the compensation committee: a puzzle," Journal of Economics and Business, Elsevier, vol. 70(C), pages 16-26.
    6. Géraldine Broye & Yves Moulin, 2010. "Rémunération des dirigeants et gouvernance des entreprises:le cas des entreprises françaises cotées," Revue Finance Contrôle Stratégie, revues.org, vol. 13(1), pages 67-98., March.
    7. Ertimur, Yonca & Ferri, Fabrizio & Maber, David A., 2012. "Reputation penalties for poor monitoring of executive pay: Evidence from option backdating," Journal of Financial Economics, Elsevier, vol. 104(1), pages 118-144.
    8. repec:spr:grdene:v:18:y:2009:i:1:d:10.1007_s10726-008-9125-y is not listed on IDEAS
    9. Sun, Jerry & Cahan, Steven F. & Emanuel, David, 2009. "Compensation committee governance quality, chief executive officer stock option grants, and future firm performance," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1507-1519, August.
    10. Vidhi Chhaochharia & Yaniv Grinstein, 2007. "The Changing Structure of US Corporate Boards: 1997-2003," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1215-1223, November.
    11. 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.
    12. Boyle, Glenn & Roberts, Helen, 2010. "Wolves in the Hen-House? The Consequences of Formal CEO Involvement in the Executive Pay-Setting Process," Working Paper Series 4063, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    13. Gius, Mark P., 2007. "Using Panel Data to Estimate the Economic Determinants of CEO Compensation," Review of Applied Economics, Review of Applied Economics, vol. 3(1-2).
    14. repec:eee:jocaae:v:9:y:2013:i:1:p:83-99 is not listed on IDEAS
    15. Udi Hoitash, 2011. "Should Independent Board Members with Social Ties to Management Disqualify Themselves from Serving on the Board?," Journal of Business Ethics, Springer, vol. 99(3), pages 399-423, March.
    16. Craig Peterson & James Philpot, 2007. "Women’s Roles on U.S. Fortune 500 Boards: Director Expertise and Committee Memberships," Journal of Business Ethics, Springer, vol. 72(2), pages 177-196, May.

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