Not clawing the hand that feeds you: The case of co-opted boards and clawbacks

• Main Authors: HUANG, Sterling, LIM, Chee Yeow, NG, Jeffrey
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Clawbacks; Co-opted boards; Corporate governance; Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/1423; https://ink.library.smu.edu.sg/context/soa_research/article/2422/viewcontent/Not_Clawing_the_Hand_that_Feeds_You_The_Case_of_Co_opted_Boards_and_Clawbacks.pdf
• Institution: Singapore Management University

We examine how board co-option, defined as the fraction of the board comprising directors appointed after the CEO assumed office, is related to clawback adoption. We find that co-opted boards have a lower probability of adopting clawback provisions. Further, the negative association between board co-option and clawback adoption is more pronounced when at least one co-opted member is on the compensation committee and when there is a higher likelihood that a clawback provision will be triggered. Finally, we find that board co-option is an important mechanism through which longer-tenured CEOs reduce the likelihood of clawback adoption.