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The determinants of board compensation in SOEs. An application to Italian local public utilities

  • Anna Menozzi
  • Fabrizio Erbetta
  • Giovanni Fraquelli
  • Davide Vannoni

This paper investigates the determinants of board compensation for a sample of Italian State Owned Enterprises (SOEs). To that purpose, we use a newly collected panel data of 106 local public utilities observed form 1994 through 2004, which includes detailed information on the boards of directors. During this period, the deregulation process inspired institutional interventions that forced utilities, traditionally owned by local municipalities, to change their juridical form and ownership structure, thereby facilitating the entrance of private investors. The corporate governance literature shows that such changes may exacerbate the agency conflicts between shareholders, top executives and the board. However, board compensation could reduce the agency costs by aligning the incentives of managers with the interests of shareholders. This paper addresses this issue by investigating the impact that board composition, firm characteristics and performance have on board compensation. We find that the average board pay is negatively related to board size and positively related to firm dimension. The public or private nature of the major shareholder does not influence board compensation but the juridical form does. Finally, while the proportion of politically connected directors is found to negatively influence the level of per capita compensation, the impact of firm performance is uncertain.

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File URL: http://www.carloalberto.org/assets/working-papers/no.231.pdf
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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 231.

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Length: 23 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cca:wpaper:231
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  1. Anna Menozzi & María Gutierrez Urtiaga & Davide Vannoni, 2010. "Board Composition, Political Connections and Performance in State-Owned Enterprises," Carlo Alberto Notebooks 185, Collegio Carlo Alberto.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  3. Xavier Gabaix & Augustin Landier, 2008. "Why Has CEO Pay Increased So Much?," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 49-100, 02.
  4. Zhilan Feng & Chinmoy Ghosh & C. Sirmans, 2007. "Director Compensation and CEO Bargaining Power in REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 225-251, October.
  5. Cambini Carlo & Filippini Massimo & Piacenza Massimiliano & Vannoni Davide, 2011. "Corporatization and Firm Performance: Evidence from Publicly-Provided Local Utilities," Review of Law & Economics, De Gruyter, vol. 7(1), pages 191-213, July.
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