Abstract
Directors are integral participants and stakeholders in outsider CEO succession events. This study examines the impact of professional director/CEO relationships in 1,173 outsider CEO successions on a range of fixed and short- and long-term, performance-related CEO compensation ratios. Results show that these relationships matter in determining the structure and composition of CEO compensation but that there are significant international differences, reflecting varying approaches to corporate governance, including board monitoring, in unique national institutional environments. Results also show that in the United States and other Anglo-Saxon capital markets, where institutional transparency is highly regarded, professional director/CEO relationships are associated with a restructuring of CEO compensation in favour of CEOs and against the interests of investors.
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