Corporate governance and executive pay in the Spanish market

Abstract

This paper evaluates the incidence of the board of directors, the nomination and remuneration committees (NRCs) and the ownership structure on the amount, composition and pay-performance sensitivity of the remuneration of executive directors. Using a panel of Spanish listed firms in the period 2005–2009, our results show that the increases in executives’ remuneration are linked to variations in shareholders’ wealth. We have also found evidence that the size of both the board and the NRC and the shareholdings of external large blockholders and executives affect the amount and structure of executive remuneration. Moreover, it is found that the existence of investment opportunities together with size and profitability all influence remuneration policy. Our results may have implications for policy makers regarding the composition of the board and NRCs as it have not be found that the presence of independent directors would restrain executives pay or increase of pay-performance sensitivity.