The Effects of Board Composition and Direct Incentives on Firm Performance

This paper examines the relationship between top management compensation and corporate performance in public utilities. Previous researchers have argued that incentives for profitability are not needed in public utilities, since regulation provides assured profits. Earlier empirical work supports this claim. We reexamine this issue and provide several methodological improvements over prior studies. Our findings are consistent with the hypothesis that compensation packages for senior managers in public utilities are constructed to provide them with incentives to maximize stockholders' wealth.

[1]  Benjamin E. Hermalin,et al.  The Determinants of Board Composition , 1988 .

[2]  E. Fama.  Agency Problems and the Theory of the Firm , 1980, Journal of Political Economy.

[3]  A. Shleifer,et al.  Management Ownership and Market Valuation: An Empirical Analysis , 1988 .

[4]  Steven N. Kaplan,et al.  Outside directorships and corporate performance , 1990 .

[5]  Richard F. Vancil,et al.  Passing the Baton: Managing the Process of CEO Succession , 1987 .

[6]  H. N. Butler,et al.  Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition , 1985 .

[7]  M. Weisbach.  Outside directors and CEO turnover , 1988 .

[8]  E. Lindenberg,et al.  Tobin's q Ratio and Industrial Organization , 1981 .

[9]  Myles L. Mace,et al.  Directors: Myth and Reality , 1971 .

[10]  J. Shoven,et al.  The Financial Valuation of the Return to Capital , 1980 .

[11]  Huntley Schaller,et al.  A re‐examination of the q theory of investment using u.s. firm data , 1990 .

[12]  Stuart Rosenstein,et al.  Outside directors, board independence, and shareholder wealth☆ , 1990 .

[13]  J. Hausman.  Specification tests in econometrics , 1978 .

[14]  S. Shavell.  Risk Sharing and Incentives in the Principal and Agent Relationship , 1979 .

[15]  H. Demsetz.  The Structure of Ownership and the Theory of the Firm , 1983, The Journal of Law and Economics.

[16]  John J. McGowan,et al.  On the Misuse of Accounting Rates of Return to Infer Monopoly Profits , 1983 .

[17]  Jensen Mc,et al.  CEO incentives-its not how much you pay, but how. , 1990 .

[18]  E. Fama,et al.  Separation of Ownership and Control , 1983, The Journal of Law and Economics.

[19]  M. C. Jensen,et al.  Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit , 1976 .

[20]  H. Demsetz,et al.  The Structure of Corporate Ownership: Causes and Consequences , 1985, Journal of Political Economy.

[21]  Kevin J. Murphy,et al.  Performance Pay and Top Management Incentives , 1990 .

[22]  John Mcconnell,et al.  Additional evidence on equity ownership and corporate value , 1990 .

[23]  神崎 克郎.  The American Law Institute,Principle of Corporate Governance and Structure--Restatement and Recommendations,1982 , 1984 .

[24]  Christopher M. James,et al.  The Takeover Market, Corporate Board Composition, and Ownership Structure: The Case of Banking , 1987, The Journal of Law and Economics.

[25]  Mircea Eliade,et al.  Myth and Reality , 2014 .

[26]  Jerold B. Warner,et al.  Stock prices and top management changes , 1988 .

[27]  Bengt Holmstrom,et al.  Moral Hazard and Observability , 1979 .

[28]  John W. Byrd,et al.  Do outside directors monitor managers , 1992 .

[29]  M. Weisbach.  Corporate governance and hostile takeovers , 1993 .

[30]  Kevin J. Murphy,et al.  CEO Incentives - It's Not How Much You Pay, But How , 1990 .