Arbeitspapier

Board Committees, CEO Compensation, and Earnings Management

We analyze the effect of committee formation on how corporate boards perform two main functions: setting CEO pay and overseeing the financial reporting process. The use of performance-based pay schemes induces the CEO to manipulate earnings, which leads to an increased need for board oversight. If the whole board is responsible for both functions, it is inclined to provide the CEO with a compensation scheme that is relatively insensitive to performance in order to reduce the burden of subsequent monitoring. When the functions are separated through the formation of committees, the compensation committee is willing to choose a higher pay-performance sensitivity as the increased cost of oversight is borne by the audit committee. Our model generates predictions relating the board committee structure to the pay-performance sensitivity of CEO compensation, the quality of board oversight, and the level of earnings management.

Sprache
Englisch

Erschienen in
Series: Working Paper Series: Finance & Accounting ; No. 181

Klassifikation
Wirtschaft
Accounting
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Firm Objectives, Organization, and Behavior: Other
Bureaucracy; Administrative Processes in Public Organizations; Corruption
Business and Securities Law
Organizational Behavior; Transaction Costs; Property Rights
Thema
Corporate Governance
Executive Compensation
Earnings Management
Board Oversight
Aufsichtsrat , Corporate Governance , Vorstand , Vergütungssystem , Erfolgsrechnung , Bilanzpolitik , Theorie

Ereignis
Geistige Schöpfung
(wer)
Laux, Christian
Laux, Volker
Ereignis
Veröffentlichung
(wer)
Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften
(wo)
Frankfurt a. M.
(wann)
2007

Handle
Letzte Aktualisierung
20.09.2024, 08:25 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Laux, Christian
  • Laux, Volker
  • Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften

Entstanden

  • 2007

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