The effect of minority veto rights on controller pay tunneling

• 成果类型: Article
• 署名作者: Fried, Jesse M.; Kamar, Ehud; Yafeh, Yishay
• 署名单位: Harvard University; Tel Aviv University; Hebrew University of Jerusalem; European Corporate Governance Institute
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.015
• 发表日期: 2020
• 页码: 777-788
• 关键词: Controlling shareholders; Executive compensation; Related-party transactions; Shareholder voting; Tunneling

摘要

A central challenge in the regulation of controlled firms is curbing rent extraction by controllers. As independent directors and fiduciary duties are often insufficient, some jurisdictions give minority shareholders veto rights over related-party transactions. To assess these rights' effectiveness, we exploit a 2011 Israeli reform that gave minority shareholders veto rights over related-party transactions, including the pay of controllers and their relatives (controller executives). We find that the reform curbed controller-executive pay and led some controller executives to resign or go with little or no pay in circumstances suggesting their pay would be rejected. These findings suggest that minority veto rights can be an effective corporate governance tool. (C) 2020 Elsevier B.V. All rights reserved.