Director Cronyism and CEO Pay in New Zealand

23 Pages Posted: 20 Aug 2016

See all articles by Michelle Li

Michelle Li

University of Auckland Business School

Helen Roberts

University of Otago - Department of Accountancy and Finance

Date Written: August 19, 2016

Abstract

This study examines the impact of director cronyism on the level of CEO pay in New Zealand. We present evidence that director compensation is consistent with the level of firm complexity and skill required to act as an independent board member. There is a strong positive relation between excess director compensation, the level and change in CEO cash and total compensation. Subsequent tests provide evidence of collusion between directors and CEOs that has driven the link between high director pay and high CEO pay. Firms with larger boards, fewer independent directors and where the CEO is a member of the compensation committee award higher CEO cash compensation.

Keywords: CEO compensation; director compensation; cronyism

JEL Classification: G34, G38, J33

Suggested Citation

Li, Qi and Roberts, Helen, Director Cronyism and CEO Pay in New Zealand (August 19, 2016). 29th Australasian Finance and Banking Conference 2016, Available at SSRN: https://ssrn.com/abstract=2826356 or http://dx.doi.org/10.2139/ssrn.2826356

Qi Li (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Helen Roberts

University of Otago - Department of Accountancy and Finance ( email )

PO Box 56
Dunedin, 9054
New Zealand
6434798072 (Phone)
6434798171 (Fax)

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