Compensation committee and executive compensation in Asia

• Main Author: Lee, Kin-Wai
• Other Authors: Nanyang Business School
• Format: Article
• Language: English
• Published: 2015
• Subjects: DRNTU::Business
• Online Access: https://hdl.handle.net/10356/106048; http://hdl.handle.net/10220/26236; http://www.craig.csufresno.edu/IJB/Volumes.htm#V19
• Institution: Nanyang Technological University

Using a sample of firms in East Asian economies, we find that level of CEO compensation is positively associated with CEO power. The positive association between the level of CEO compensation and CEO power is attenuated by the proportion of independent directors on the compensation committee and the equity ownership held by external block-holders. Furthermore, CEO pay-performance sensitivity is lower in firms with powerful CEOs. In the sub-sample of firms with powerful CEOs, CEO payperformance sensitivity is higher in firms with higher compensation committee independence and higher proportion of equity held by block-holders. Additional tests indicate that excessive CEO compensation in firms with more powerful CEO is associated with lower subsequent operating performance and lower future stock returns. The negative association between excessive CEO compensation and future firm performance is attenuated by stronger corporate structures.