Abstract
This article empirically examines the connection between the board of directors’ characteristics and excesses in remuneration for directors from a sustainability perspective, highlighting the role of information transparency on remuneration control. Using data from 73 listed companies in the period 2007–2012 (the global financial crisis), we find that (1) board size presents a non-linear relationship with excessive total directors’ remuneration during the crisis period; (2) other board characteristics (board independence, duality and directors’ ownership) do not show a significant relationship with excessive directors´ remuneration; and (3) voluntary transparency on directors’ remuneration significantly contributes to controlling excessive total directors’ remuneration, which contributes to the long-term sustainability of the firm. The results of this study provide good reasons to take into account the effect of corporate governance characteristics and transparency on the remuneration excesses committed during the global financial crisis.
Highlights
The sustainable perspective of the firm, which is based on the integration of economic, social, and environmental concerns into management decisions and the firm’s aims, increases corporation’s responsibility to their stakeholders
This study addresses concerns expressed by previous literature, regulators, minority shareholders, and society over the excessive directors’ compensations regarding the role they perform to protect the sustainability of the company in the long term
We investigate the link between corporate governance mechanisms, the voluntary disclosure of directorsremuneration and excessive director remuneration
Summary
The sustainable perspective of the firm, which is based on the integration of economic, social, and environmental concerns into management decisions and the firm’s aims, increases corporation’s responsibility to their stakeholders. The lack of transparency in the business domain has demonstrated that it provides an opportunity for directors to set remunerations that fail to match their actual work [19] and to take more power to increase their own compensation at the expense of other stakeholders [20] In this sense, it is demonstrated that if there is a topic that has been based on a large opacity of information, it is the issue of directors’ remuneration [15], despite the importance of this information to both shareholders and stakeholders. Based on awareness of the importance of transparency, one of the recommendations taken at the international, European and national levels has focused on increasing the information transparency of compensation practices, regarding the detailed compensation policies and individual compensations granted to members of boards of directors In this sense, could transparency be the tool to avoid the expropriation of wealth to shareholders through excesses in remuneration of directors when corporate governance is weak?. The fourth section provides the analysis of the main results, and the fifth section delivers the main conclusions, limitations, and future lines of research
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