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| Tekijä: | Sun, J. Cahan, S. |
| Otsikko: | The effect of compensation committee quality on the association between CEO cash compensation and accounting performance |
| Lehti: | Corporate governance
2009 : MAR, VOL. 17:2, p. 193-207 |
| Asiasana: | corporate governance compensation executives labour law evaluation |
| Kieli: | eng |
| Tiivistelmä: | We investigate how compensation committee quality affects the association between CEO cash compensation and accounting earnings and the moderating effects of growth possibilities and earnings status. This article contributes to the agency-based research on CEO compensation by: 1) directly studying the effect of compensation committee quality on the sensitivity of CEO cash compensation to accounting earnings; 2) investigating if the role of compensation committee quality differs across firms; and 3) developing a wider and richer way of measuring compensation committee quality. Using a sample of 812 US firms, we find CEO cash compensation more positively related with accounting earnings when firms have a high-quality compensation committee. Also, the positive effect of compensation committee quality on the association between CEO cash compensation and accounting earnings is found weaker for high-growth or loss-making firms. The findings indicate that shareholders and directors should concentrate on the composition of compensation committees as its quality is found to vary depending on compensation committee size and other attributes of the committee members. Moreover, for compensation committee members, greater challenges lie in monitoring CEO compensation contracts for firms with high growth or loss generation. Even when all compensation committees are regulated to be fully independent, quality differences still exist among these independent compensation committees. |
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