Abstract
We investigate the dynamics of two governance constructs, management influence over the board of directors and CEO remuneration, in enterprises in crisis from 1992 to 2019. Data reveal a strong trend of improving governance over time, which confounds the conclusion concerning the impact of distress on governance. Using a bias-corrected matching estimator to control for secular trends, we find that distressed businesses cut management board appointments and CEO compensation, deepen managerial incentive alignment, and increase CEO turnover. The performance-related component of CEO remuneration accounts for the majority of changes in CEO compensation in troubled businesses, which is consistent with the "shareholder value" perspective on CEO compensation.
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