Board Committee Overlap and the Use of Earnings in CEO Compensation Contracts

• 成果类型: Article
• 署名作者: Carter, Mary Ellen; Lynch, Luann J.; Martin, Melissa A.
• 署名单位: Boston College; University of Virginia; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4187
• 发表日期: 2022
• 页码: 6268-6297
• 关键词: Executive compensation; Audit committee; compensation committee; Board committees; Incentive pay; performance measures

摘要

Using proxy statement data describing the terms of compensation contracts, we examine how overlapping membership between compensation and audit committees influences the use of earnings metrics in compensation. Although research predicts that such overlap could either increase or decrease the reliance on earnings, we find that firms with overlapping directors rely less on earnings-based performance measures in incentive contracts without altering the overall level of performance-contingent cash bonuses. In addition, we provide evidence that firms substitute earnings measures with measures less subject to earnings management. Our findings are robust to potential alternative explanations, extend to an implicit relation between earnings and compensation for a larger sample, and are not driven by the tendency toward an overlapping committee structure more broadly.