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Determinants of US Outside Director Compensation

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  • Brian K. Boyd

Abstract

Executive compensation has recently become the subject of extensive scrutiny by the popular press. However, compensation for corporate directors is one area which has only received little attention or research. The present study combined resource dependence and agency theories with previous research on executive salaries to develop an explanatory model of director compensation. Data were collected from US firms at two points in time to assess the stability of these predictors. Four variables were found to have a significant relationship with director compensation: firm size, firm profitability, equity ownership by directors, and resource richness of the board. However, the explanatory power of these variables appear to decline over time. Practical implications of these results are discussed.

Suggested Citation

  • Brian K. Boyd, 1996. "Determinants of US Outside Director Compensation," Corporate Governance: An International Review, Wiley Blackwell, vol. 4(4), pages 202-211, October.
    • Handle: RePEc:bla:corgov:v:4:y:1996:i:4:p:202-211
    DOI: 10.1111/j.1467-8683.1996.tb00149.x
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    Cited by:

    1. Andres, Christian & Fernau, Erik & Theissen, Erik, 2014. "Should I stay or should I go? Former CEOs as monitors," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 26-47.
    2. Martin Bugeja & Stephanie Fohn & Zoltan Matolcsy & Neil Fargher, 2016. "Determinants of the levels and changes in non-executive director compensation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 627-667, September.
    3. Broye, Géraldine & François, Abel & Moulin, Yves, 2017. "The cost of CEO duality: Evidence from French leadership compensation," European Management Journal, Elsevier, vol. 35(3), pages 336-350.
    4. Ferris, Stephen P. & Javakhadze, David & Liu, Yun, 2020. "The price of boardroom social capital: The effects of corporate demand for external connectivity," Journal of Banking & Finance, Elsevier, vol. 111(C).
    5. Lars Oxelheim & Kevin Clarkson, 2015. "Cronyism and the Determinants of Chairman Compensation," Journal of Business Ethics, Springer, vol. 131(1), pages 69-87, September.
    6. Andreas, Jörn Michael & Rapp, Marc Steffen & Wolff, Michael, 2010. "Determinants of director compensation in two-tier systems: evidence from German panel data," CEFS Working Paper Series 2010-06, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    7. Elena Merino & Montserrat Manzaneque & Alba Maria Priego, 2013. "“Board independence” and compensation structure of directors," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 2(2), pages 125-152.
    8. Peter Hahn & Meziane Lasfer, 2011. "The compensation of non-executive directors: rationale, form, and findings," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(4), pages 589-601, November.
    9. Shamsud D. Chowdhury & Eric Zengxiang Wang, 2020. "Board size, director compensation, and firm transition across stock exchanges: evidence from Canada," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 685-712, September.
    10. Abraham Simon Otim Emuron & Tian Yixiang, 2020. "Financial distress and non‐executive director compensation: Evidence from state‐owned enterprises in South Africa post King III," African Development Review, African Development Bank, vol. 32(2), pages 228-239, June.
    11. Pietro Marchetti & Valeria Stefanelli, 2009. "Does the compensation level of outside director depend on its personal profile? Some evidence from UK," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 13(4), pages 325-354, November.
    12. Elena Merino & Montserrat Manzaneque-Lizano & Jesus Sanchez-Araque, 2019. "Sustainability and Corporate Governance: Transparency and Excessive Directors’ Remuneration in Listed Companies during the Global Financial Crisis," Sustainability, MDPI, vol. 12(1), pages 1-19, December.
    13. Sven-Olof Yrjö Collin & Yuliya Ponomareva & Sara Ottosson & Nina Sundberg, 2017. "Governance strategy and costs: board compensation in Sweden," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 685-713, September.
    14. Mallin, Chris & Melis, Andrea & Gaia, Silvia, 2015. "The remuneration of independent directors in the UK and Italy: An empirical analysis based on agency theory," International Business Review, Elsevier, vol. 24(2), pages 175-186.
    15. Lucie Courteau & Roberto Di Pietra & Paolo Giudici & Andrea Melis, 2017. "The role and effect of controlling shareholders in corporate governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 561-572, September.
    16. Martin Arnegger & Christian Hofmann, 2014. "Überprüfung des Zusammenhangs von Eigenschaften, Aufgaben und Vergütung von Aufsichtsräten deutscher Unternehmen," Schmalenbach Journal of Business Research, Springer, vol. 66(7), pages 518-566, November.

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