Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261882 
Year of Publication: 
2020
Citation: 
[Journal:] BRQ Business Research Quarterly [ISSN:] 2340-9436 [Volume:] 23 [Issue:] 3 [Publisher:] Sage Publishing [Place:] London [Year:] 2020 [Pages:] 217-233
Publisher: 
Sage Publishing, London
Abstract: 
We explore the effect of institutional directors on Chief Executive Officer (CEO) pay (total, fixed, and variable compensation). We delve particularly into the impact of pressure-sensitive and pressure-resistant institutional directors, who, respectively, represent institutional investors who maintain and investors who do not maintain a business relationship with the firm whose board they serve on. Focusing on CEO total pay, the findings show that institutional and pressure-resistant directors on boards behave similarly, affecting CEO total pay in a nonlinear way: as the presence of institutional and pressure-resistant directors on boards increases, the monitoring hypothesis prevails, and subsequently, better corporate governance decreases CEO total pay. However, when their presence on boards exceeds a critical point, the entrenchment hypothesis holds, thereby leading to an increase in CEO total pay. Contrary to our predictions, pressure-sensitive directors do not affect CEO total pay. Regarding the CEO's compensation structure (fixed and variable), the results suggest that institutional and pressure-resistant directors increase fixed compensation and reduce variable pay, while pressure-sensitive directors affect neither fixed nor variable compensation. This evidence supports the view that institutional directors should be considered as a heterogeneous collective.
Subjects: 
CEO pay
Institutional directors
pressure-resistant
pressure-sensitive
JEL: 
G3
G34
M12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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