The governance of director compensation*

• 成果类型: Article
• 署名作者: Fang, Lily; Huang, Sterling
• 署名单位: INSEAD Business School; Singapore Management University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103813
• 发表日期: 2024
• 关键词: Director compensation; determinants; Self-dealing; natural experiment; Seinfeld v. Slager

摘要

The average total compensation of directors in U.S.-listed companies was $342,030 in 2020, 5.06 times the median household income. Directors set their own pay, giving rise to potential self -dealing. We argue and document that in the presence of self -dealing, external mechanisms such as legal standards act as effective means of governance. Following a landmark Delaware court ruling that subjected director pay to a more stringent legal standard, Delaware -incorporated firms reduced director compensation relative to non -Delaware firms and experienced positive and non -transient stock price reactions. Our results indicate that proper governance of director compensation enhances firm value.