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Do Directors Perform for Pay?

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  • Adams, Renée B.
  • Ferreira, Daniel

Abstract

Many corporations reward their outside directors with a modest fee for each board meeting they attend. Using two non-overlapping data sets on director attendance behavior, we provide robust evidence that directors are less likely to have attendance problems at board meetings when board meeting fees are higher. This is suprising since meeting fees, on average roughly $1,200, represent an arguably small fraction of the total wealth of a representative director in our samples. Thus, corporate directors appear to perform for even very small financial rewards. We also find that firms that do not pay meeting fees appear to pay each of their directors approximately $40,000 more than firms that pay meeting fees. This suggests that firms that ignore meeting fees as an incentive device have a tendency to overpay their directors.

Suggested Citation

  • Adams, Renée B. & Ferreira, Daniel, 2005. "Do Directors Perform for Pay?," CEI Working Paper Series 2005-2, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hitcei:2005-2
    Note: This Version: April 6, 2004
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    References listed on IDEAS

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    More about this item

    Keywords

    Directors; Executive Compensation; Incentives; Attendance; Board Meetings;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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