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Executive Investigator Tracking and Analyzing Executive Salaries, Bonuses, and Perks
 Wednesday, June 18, 2008
Not surprisingly, a soon to be published academic paper shows that independent boards lead to a stronger link between CEO pay and company performance:
“In this paper, I find that the independence
requirement imposed on boards of directors by the Sarbanes-Oxley Act of
2002, together with the governance regulations subsequently introduced
by stock exchanges, affects CEO pay structure,” explains the paper’s
author Teodora Paligorova, in its abstract.
“In firms whose
corporate boards were originally less independent, and thus more
affected by these provisions, CEO pay for performance strengthened
while pay for luck decreased after adopting SOX,” it finds. “In
contrast, those firms that exhibited strong board independence prior to
SOX showed little evidence of pay for luck and little change in pay for
performance following the adoption of SOX.”
The results are
consistent with the rent-extraction hypothesis -- which suggests that
weak corporate governance allows entrenched CEOs to capture the
pay-setting process -- it adds.
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© 2009, Accelerize New Media, Inc. (OTC-BB: ACLZ)
Senior Editor: Justin Kuepper
Executive Investigator reports on and analyzes Executive pay, perks and other compensation, and current news that relates to Executive Compensation.
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