CEO compensation, IOS and the role of corporate governance

Fathi Elloumi, Jean Pierre Gueyié

Research output: Contribution to journalJournal Articlepeer-review

20 Citations (Scopus)

Abstract

The empirical relationship between chief executive officer (CEO) compensation, the investment opportunity set (IOS) and corporate governance mechanisms is analyzed for a sample of 415 Canadian firms in 1997. Results indicate that firms with high IOS pay higher levels of total compensation to their CEOs. In addition, CEOs of high IOS derive a larger proportion of their compensation from performance-contingent forms of pay such as bonuses, stock option grants and long-term incentive plans. However, CEOs with weak boards of directors are compensated more than CEOs with powerful boards. Contrary to our expectation, we find that in high IOS firms with weak boards of directors, CEOs seek to have higher proportions of contingent forms of pay in their compensation. An implication of this result is that contingent compensation practices may be a more value-enhancing form of remuneration for CEOs.

Original languageEnglish
Pages (from-to)23-33
Number of pages11
JournalCorporate Governance: The international journal of business in society
Volume1
Issue number2
DOIs
Publication statusPublished - 1 Jun. 2001

Keywords

  • Corporate governance
  • Directors
  • Investment
  • Remuneration
  • Top management

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