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The nexus between effective corporate monitoring and CEO compensation

Author

Listed:
  • Anam Tasawar
  • Mian Sajid Nazir

Abstract

Managerial compensation to top executives, particularly to CEO, has remained a topic of continuing interest in corporate finance literature. Corporations are required to pay a handsome amount to attract and motivate competent business executives to get their jobs done in a befitting manner. Accordingly, executives try to grab higher level of compensation for themselves which might be at the cost of harming firm value and shareholders' interests. In this context, various governing mechanism have been introduced to effectively monitor this opportunistic behaviour of executives. In this context, the current study empirically evaluates the impact of different corporate governance monitoring mechanisms such as institutional shareholders ownership and activism, independence of boards and audit committees, and presence of blockholders in company on level of compensation paid to CEO. The results revealed that more independent board and audit committee members meeting more frequently are helpful in mitigating the higher level of CEO compensation. Moreover, higher financial institutional ownership found positively related to CEO compensation which is in accordance with strategic alliance hypothesis between managers and sponsoring financial institutions.

Suggested Citation

  • Anam Tasawar & Mian Sajid Nazir, 2019. "The nexus between effective corporate monitoring and CEO compensation," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 10(1), pages 81-94.
    • Handle: RePEc:ids:ijcgov:v:10:y:2019:i:1:p:81-94
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    Cited by:

    1. Samya Tahir & Mian Sajid Nazir & Muhammad Ali Jibran Qamar & M. Martin Boyer, 2022. "Ineffective implementation of corporate governance? A call for greater transparency to reduce agency cost," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1528-1547, July.

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