Board composition and the use of accounting measures: the effect on the relation between CEO compensation and firm performance

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dc.contributor.authorEllingson, Dee Ann Hetlanden
dc.contributor.committeechairBrown, Robert M.en
dc.contributor.committeememberEasterwood, Cintia M.en
dc.contributor.committeememberDenis, David J.en
dc.contributor.committeememberRichardson, Frederick M.en
dc.contributor.committeememberKumar, Ramanen
dc.contributor.departmentAccounting and Information Systemsen
dc.date.accessioned2014-03-14T21:12:35Zen
dc.date.adate2008-06-06en
dc.date.available2014-03-14T21:12:35Zen
dc.date.issued1996-04-05en
dc.date.rdate2008-06-06en
dc.date.sdate2008-06-06en
dc.description.abstractBoards of directors of corporations have been criticized for failing to effectively perform their roles of ratifying and monitoring managerial decisions, retaining and terminating top management, and evaluating and rewarding executive performance. critics have suggested that increasing the proportion of outside directors on the board increases independence and improves board effectiveness. Research has provided evidence that the composition of the board affects firm performance, the likelihood of chief executive turnover, and the monitoring of important decisions such as the adoption of poison pills and acquisitions. In this study, the effect of the composition of the board on the relationship between executive compensation and firm performance is investigated. The effect of board composition on the types of performance measures, accounting and stock return, used in the pay-performance relationship is also examined. Data were gathered from publicly available sources, including Forbes compensation surveys, firms’ proxy statements, and COMPUSTAT and CRSP tapes. These data were then statistically analyzed using a regression model with indicator variables for outsider-dominated boards. The types of performance measures, accounting and stock return, were then compared to test whether their usage in the pay-performance relationship differs between outsider-dominated and insider-dominated boards. The results of this study indicate that the association between compensation and stock return measures of performance is stronger when the board is composed of a majority of outside directors. There is no evidence, however, of a stronger association between compensation and accounting measures of performance for outsider-dominated boards. The results also reveal that outsider-dominated boards use both accounting and stock return measures of performance in the pay-performance relationship whereas insiders focus on accounting measures. These results imply that outside directors act in the interests of shareholders by linking compensation to stock return measures as well as accounting measures of performance. These findings are consistent with the conclusions of other board composition studies that outside directors play an important role in the corporate governance process.en
dc.description.degreePh. D.en
dc.format.extentxi, 183 leavesen
dc.format.mediumBTDen
dc.format.mimetypeapplication/pdfen
dc.identifier.otheretd-06062008-154716en
dc.identifier.sourceurlhttp://scholar.lib.vt.edu/theses/available/etd-06062008-154716/en
dc.identifier.urihttp://hdl.handle.net/10919/38091en
dc.language.isoenen
dc.publisherVirginia Techen
dc.relation.haspartLD5655.V856_1996.E455.pdfen
dc.relation.isformatofOCLC# 35002908en
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectexecutive compensationen
dc.subjectboard of directorsen
dc.subject.lccLD5655.V856 1996.E455en
dc.titleBoard composition and the use of accounting measures: the effect on the relation between CEO compensation and firm performanceen
dc.typeDissertationen
dc.type.dcmitypeTexten
thesis.degree.disciplineAccounting and Information Systemsen
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen
thesis.degree.leveldoctoralen
thesis.degree.namePh. D.en

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