The Effect of Compensation Design and Corporate Governance on the Transparency of CEO Compensation Disclosures

UTS School of Accounting Working Paper No. 45

40 Pages Posted: 22 Jun 2001

See all articles by Jeffrey Coulton

Jeffrey Coulton

UNSW Business School

Clayton James

University of Sydney

Stephen L. Taylor

University of Technology Sydney; Financial Research Network (FIRN)

Date Written: May 2001

Abstract

We investigate the "transparency" (i.e., the level of detail) of CEO compensation disclosures by Australian firms following regulatory changes in July 1998. After controlling for other possible economic determinants of disclosure, we find that transparency is negatively related to the level of size-adjusted compensation. We also find that transparency increases with firm size and (weakly) with performance. There is also evidence of a "persuasion effect", in that disclosures made after the release of regulatory "guidelines" are more transparent. However, we find no evidence of specific corporate governance attributes (i.e., separation of the CEO and chair roles, auditor quality, board composition, the existence and structure of board committees) being associated with more transparent disclosures. Nor do we find any evidence of transparency being associated with the mix of cash and stock-based compensation. Although there is some indirect evidence of a negative relation between blockholder ownership and disclosure transparency, we find no significant relation with insider ownership. Overall, our results are consistent with corporate governance mechanisms having minimal impact on disclosure where there are potential conflicts of interest between the CEO and outside shareholders.

Keywords: Corporate governance, Disclosure, Compensation

JEL Classification: G32, G12

Suggested Citation

Coulton, Jeffrey J. and James, Clayton and Taylor, Stephen L., The Effect of Compensation Design and Corporate Governance on the Transparency of CEO Compensation Disclosures (May 2001). UTS School of Accounting Working Paper No. 45, Available at SSRN: https://ssrn.com/abstract=273628 or http://dx.doi.org/10.2139/ssrn.273628

Jeffrey J. Coulton (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
+61293855811 (Phone)
+93855925 (Fax)

Clayton James

University of Sydney ( email )

University of Sydney
Sydney NSW 2006
Australia

Stephen L. Taylor

University of Technology Sydney ( email )

UTS Business School
PO Box 123 Broadway
Sydney, NSW 2007
Australia
61295143437 (Phone)
61295143513 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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