Abstract
Most of the empirical studies on board remuneration have focused on finding explanatory performance measures. There are studies that analyze if the compensation contracts of directors reward managers in such a way that they strive to maximize firm performance and shareholders’ wealth; however, there are few studies on the social aspect of corporate governance, or agent–employee and principal–employee relationships. Thus, in this study, our aim is to test whether there is a causal relationship between the remuneration of the board of directors of listed companies and the personnel policies of the companies, expressed through the cost of personnel and layoffs. For that, we used a sample of Spanish listed companies, and we found that two performance measures (return on equity and earnings per share on market price) have a greater effect on the growth rate of board remuneration when layoffs occur. Additionally, we found that the sales revenue and cash flow on total assets subsequently influenced personnel management.
Highlights
IntroductionA vast field of research on managerial decision making and its effects on shareholder wealth has emerged
As for the causality of the performance measures, we observe that board compensation shows a direct causal relationship with return on equity and earnings per share on price from the previous year; we observe a positive size effect on growth rate of the board remuneration
In this study, our aim was to test whether there is a causal relationship between the remuneration of the board of directors of listed companies and the personnel policies of the companies, expressed through the cost of personnel and layoffs
Summary
A vast field of research on managerial decision making and its effects on shareholder wealth has emerged. To avoid this situation, manager compensation based on performance measures that represent an increase in shareholder value has emerged. Manager compensation based on performance measures that represent an increase in shareholder value has emerged It is in this context that our empirical study analyzes whether such managerial compensation policies are conditioned by their decisions on employees. Corporate governance studies have originated from the issues related to conflicts of interests between management and shareholders and directors’ accountability to shareholders ([1,2,3]) and have given rise to different approaches to the same problem: the agency contract
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