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Shareholder Rights, Boards, and CEO Compensation

  • Fahlenbrach, Rudiger

    (Ohio State U)

I analyze the role of executive compensation in corporate governance. As proxies for corporate governance, I use board size, board independence, CEO-chair duality, institutional ownership concentration, CEO tenure, and an index of shareholder rights. The results from a broad cross-section of large U.S. public firms are inconsistent with recent claims that entrenched managers design their own compensation contracts. The interactions of the corporate governance mechanisms with total pay-for-performance and excess compensation can be explained by governance substitution. If a firm has generally weaker governance, the compensation contract helps better align the interests of shareholders and the CEO.

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File URL: http://www.cob.ohio-state.edu/fin/dice/papers/2008/2008-5.pdf
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Paper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2008-5.

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Date of creation: Feb 2008
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Handle: RePEc:ecl:ohidic:2008-5
Contact details of provider: Phone: (614) 292-8449
Web page: http://www.cob.ohio-state.edu/fin/dice/list.htm
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