Does the age of compensation committee members matter for CEO compensation?

IF 4.6 3区管理学 Q1 BUSINESS Corporate Governance-An International Review Pub Date : 2023-10-02 DOI:10.1111/corg.12560

Yiwei Li, Michael Clements, Carol Padgett, Xiu-Ye Zhang

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Abstract

Research Question/Issue

We examine the impact of the age of compensation committee (CC) members on CEO compensation. Sociological theory suggests that age is a significant demographic factor influencing behavior. We argue that monitoring intensity increases with age because older directors are more likely to commit to their fiduciary duties.

Research Findings/Insights

Using FTSE 350 firms for the period 2002 to 2017, we find that CC members' age is negatively associated with the level of CEO pay but positively associated with pay–performance sensitivity after controlling for risk aversion attitude, experience in board monitoring, knowledge of the firm, and other firm and CEO characteristics. The relationships remain robust to alternative measures for age and compensation, using two-stage least squares and high-dimensional fixed effects models. Consistent with the view that older individuals tend to hold higher ethical standards and concomitant closer monitoring, we find that age effects are sensitive to the influence of ethical factors and are strongest for those firms for which intense monitoring is most needed. This suggests that age operates via older directors carrying out their roles more assiduously. We further show that our findings are less likely to be driven by director reputational effects, and the relationship between CC member age and CEO compensation persists even when we control for multiple dimensions of culturally inherited attributes of the CC members.

Theoretical/Academic Implications

Despite the large literature on the influence of demographic characteristics on corporate governance, this study is the first on the monitoring effect of CC members' age. It contributes to the literature on the influence of demographic characteristic. It also contributes to the literature on CEO compensation by identifying a demographic factor—age—as a determinant of CEO pay, after controlling for the economic and corporate governance variables of the firm.

Practitioner/Policy Implications

This study highlights the role of demographic factors in explaining the monitoring of the CEO compensation contracting process and provides timely evidence on the recent regulatory changes.

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薪酬委员会成员的年龄对首席执行官的薪酬有影响吗？

研究问题/议题我们研究薪酬委员会（CC）成员的年龄对首席执行官薪酬的影响。社会学理论认为，年龄是影响行为的重要人口因素。我们认为，监督强度会随着年龄的增长而增加，因为年龄较大的董事更有可能履行其信托责任。研究结果/见解利用 2002 年至 2017 年期间富时 350 指数公司的数据，我们发现，在控制了风险规避态度、董事会监督经验、对公司的了解以及其他公司和首席执行官特征之后，委员会成员的年龄与首席执行官的薪酬水平负相关，但与薪酬-绩效敏感性正相关。通过使用两阶段最小二乘法和高维固定效应模型，这些关系对于年龄和薪酬的其他衡量标准仍然是稳健的。我们发现，年龄效应对道德因素的影响非常敏感，而且对那些最需要严格监督的公司来说，年龄效应最强。这表明，年龄是通过年长的董事更认真地履行职责来发挥作用的。我们进一步表明，我们的研究结果不太可能是由董事的声誉效应驱动的，即使我们对委员会成员的文化传承属性的多个维度进行控制，委员会成员年龄与首席执行官薪酬之间的关系仍然存在。理论/学术意义尽管有大量文献论述了人口特征对公司治理的影响，但本研究是第一项关于委员会成员年龄的监督效应的研究。它为有关人口特征影响的文献做出了贡献。在控制了公司的经济和公司治理变量之后，本研究还发现了一个人口统计因素--年龄--是 CEO 薪酬的决定因素，从而为有关 CEO 薪酬的文献做出了贡献。实践者/政策启示本研究强调了人口统计因素在解释首席执行官薪酬签约过程的监督方面所起的作用，并为近期的监管变化提供了及时的证据。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Corporate Governance-An International Review Multiple-

CiteScore

7.00

自引率

11.30%

发文量

期刊介绍： The mission of Corporate Governance: An International Review is to publish cutting-edge international business research on the phenomena of comparative corporate governance throughout the global economy. Our ultimate goal is a rigorous and relevant global theory of corporate governance. We define corporate governance broadly as the exercise of power over corporate entities so as to increase the value provided to the organization"s various stakeholders, as well as making those stakeholders accountable for acting responsibly with regard to the protection, generation, and distribution of wealth invested in the firm. Because of this broad conceptualization, a wide variety of academic disciplines can contribute to our understanding.