Abstract
This paper investigates the relationship between the gender composition of firms’ remuneration committees and the relative weight of variable monetary compensation in these firms’ top executives’ compensation packages. Previous archival research into executive compensation has mainly relied on agency theory, managerial power theory and tournament models to construct its theoretical frameworks. However, both psychological and corporate governance-related research concerning gender differences in, for instance, risk- and inequality-aversion, suggest that the gender variable should be included in the academic debate on executive compensation.Controlling for size, industry, and corporate governance variables, this paper uses simple least squares analysis to regress measures of the relative weight of variable compensation against measures of female presence in remuneration committees, in a sample of 25 806 fiscal year/executive combinations. This regression is repeated in a multilevel model that controls for firm fixed effects in a sample of 9048 fiscal year / executive combinations. The results indicate that a female presence in the remuneration committee is negatively associated with the relative weight of the annual bonus in top executives’ compensation contracts.
Highlights
This paper examines whether the gender composition of a firm’s remuneration committee influences the relationship between fixed and variable monetary compensation for top executives
The results indicate that a female presence in the remuneration committee is negatively associated with the relative weight of the annual bonus in top executives’ compensation contracts
To investigate the effect of a female presence in remuneration committees on the relative weight of variable compensation in executive board members’ compensation packages, our analysis focuses on publicly traded US and Canadian firms
Summary
This paper examines whether the gender composition of a firm’s remuneration committee influences the relationship between fixed and variable monetary compensation for top executives. Several theories have been put forward to explain the variance in pay practices across firms and industries, such as agency theory, managerial power theory, and tournament models These theories have not yet been able to provide definitive evidence on the determinants of executive compensation (Lambert, Larcker, & Rajan, 1993). To the best of our knowledge, this is the first paper that investigates the relationship between the gender composition of firms’ remuneration committees and the relative weight of variable monetary compensation in these firms’ top executives’ compensation packages. This study investigates the effect of a female presence in firms’ remuneration committees on the relative weight of performance-contingent pay for top executives. The remainder of this paper is organized as follows: the section contains a literature review; section three develops the hypothesis; the data and sample selection are discussed in section four; section five explains the empirical methodology; and section six presents and discusses the empirical results
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