Board Monitoring, Consulting, and Reward Structures*

• 成果类型: Article
• 署名作者: Drymiotes, George; Sivaramakrishnan, Konduru
• 署名单位: University of Cyprus; Texas A&M University System; Texas A&M University College Station
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2011.01109.x
• 发表日期: 2012
• 页码: 453-+
• 关键词: DIRECTORS; incentives; firm

摘要

Recent corporate governance failures have highlighted the need for aligning the incentives of corporate boards with shareholder interests. Equity-based board compensation has been viewed as a way to achieve this objective because it ties board compensation with long-term firm value. However, we show that long-term incentives alone may not suffice in motivating boards to fulfill their role in monitoring corporate executives, although they are effective in inducing boards to play an active advisory ( consulting) role. We find that providing some short-term incentives - in particular using the same short-term measure used to evaluate managers - may indeed be necessary to induce boards to fulfill their monitoring role effectively. Thus, our findings allow us to tie specific aspects of board compensation to specific board functions. In practice, directors generally hold both vested and unvested ( restricted) equity-based instruments, and therefore their actions are influenced by a combination of short-term and long-term incentives. Our results provide a theoretical rationale for why both types of incentives - short term and long term - are essential to ensure board effectiveness.