The Structure Of Directors Compensation And Firm Performance

Abstract

vii newlineABSTRACT newlineTitle : The Structure of Directors Compensation and Firm Performance newlineDegree: Doctor of Philosophy Management newlineCorporate Governance advocates have strongly encouraged firms to include proper structure in newlinedirectors compensation to help align directors interested with that of corporate stockholders. newlineIn response, firms have drastically increased their use of structure-based compensation for newlinedirectors (Pearl Meyer and Partners, 2004). newlineWhile the argument in favor of structure based director compensation is intuitively appealing, newlinethere is very little evidence of the efficacy of structure based director compensation as Various newlinecommittee, like Kumar manglam Birla committee(1998), CII Desirable code of corporate newlinegovernance (1998), recommended appropriate mix of incentives for non-executive directors, newlinethe recommendation that appropriate mix of fixed (salary and perks) and variable newlinepay(commission) to non-executive director towards keeping eye on short term profits and long newlineterm shareholder value. newlineIn an effort to determine the effectiveness of this policy, the study will use multivariate newlineregression to examine the relation between director compensation and firm performance. newlineThe findings provide some interesting insights into the relation between Independent newlinedirector compensation and firm performance. This study is relevant, firstly, with the view that newlineacademics have shown less interest in understanding how non-executive board members are newlinecompensated and what effect their compensation has on firm performance (Sarkar and Sarkar , newline2012). Secondly, this study is trying to look it from the lens of economist, to see if linear pay- newlineperformance relationship exists , which prefer incentives throughout the entire range of newlineperformance levels and advocate fixed performance standard which discourages earning newlinemanipulations, (Jensen and Murphy,2004). newline The researcher believes this study is significant in three ways .First, the study provides newlineinsight into the structure of independent directors compensation struc