The Impact of Compensation Committee Quality and CEO Power on Director and Supervisor Compensation in Loss-Making Firms
Teng-Shih Wang/Department of Accounting, Providence University
Shaio-Yan Huang/Department of Accounting and Information Technology, National Chung Cheng University
Yi-Yan Lee/Department of Accounting and Information Technology, National Chung Cheng University
Abstract
This paper aims to investigate the effect of the quality of compensation committee on the self-interested board of directors after the establishment of mandatory compensation committee. Moreover, this paper investigates the role of CEO power in the relationship between compensation committee quality and the self-interested board of directors. From the data of listed companies between 2012 and 2017, we find that firms with better compensation committees and higher CEO power can reduce the phenomenon of loss making firms yet increasing their director and supervisor compensation. However, we also find that CEO power cannot moderate the relationship between the quality of a compensation committee and a board compensation increase in a loss-making firm. Our results demonstrate that when the CEO has greater power, the compensation committee is less effective to prevent the board of directors and supervisors in loss-making firms from gaining unreasonably high compensation.
Keywords
Compensation committee qualityCEO powerCompensation of the board of directors and supervisorLoss-making firms
100 Views 21 Downloads