Board control and ceo compensation

1 June 1994

journal article
research article
Published by Wiley in Strategic Management Journal

Vol. 15 (5) , 335-344
https://doi.org/10.1002/smj.4250150502

Abstract

The board of directors has been identified as a key internal control mechanism for setting CEO compensation. Theory suggests that CEOs will attempt to circumvent board control in an effort to maximize salary. This hypothesis was tested using a sample of 193 firms in a cross‐section of industries. Corporate governance literature was reviewed to develop a multiple indicator measure of board control. Although, as hypothesized, CEO salaries were greater in firms with lower levels of control, CEO compensation was not significantly related to firm size or profitability.

Keywords

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