Abstract
The aim of this research is to assess the role of the board of directors in determining CEO’s compensation in the context of listed European companies for 3 fiscal years (2016-2017-2018). Based on a sample extracted from 11 European countries (France, Belgium, Germany, Italy, Spain, Ireland, Sweden, Denmark, Finland, United Kingdom and Netherlands), the results reveal the importance of board of directors characteristics in determining of CEO’s compensation. The board size, CEO duality, the presence of independents directors and the existence of compensation committee have been shown as determinants of CEO’s compensation.
Highlights
CEO compensation is a field of current affairs and ongoing development
The univariate analysis focuses on analyzing the role of the board of directors in determining the CEO’s compensation
A lower probability than the threshold values shows the rejection of the null hypothesis ("no difference between the averages of the two groups"). These results illustrate that companies with below-average board size assign higher total compensation to their CEO
Summary
CEO compensation is a field of current affairs and ongoing development. It is considered as one of the topics with great interest to politicians, regulators, stockholders and other stakeholders. CEO’s pay structure remains a topic of large debate, because of its impact on reducing agency costs and guarantying interest alignment between CEO and stockholders. In 2009, Towers Perrin (Note 1)'s study regarding compensations shows that the majority of large French companies have readjusted the compensation of their CEO’s as a result of the economic crisis. The new report of Willis Towers Watson (2018) has declared that, on average, a CEO of the largest stock- listed companies in Western and Eastern Europe is paid € 5.8 million in total as direct compensation (Note 2)
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