Corporate Governance (1996)

Author: Boyd, B.K.

Date: 1996

Title: Determinants of US outside director compensation

Abstract: Executive compensation has recently become the subject of extensive scrutiny by the popular press.  However, compensation for corporate directors is one area which has only received little attention or research.  The present study combined resource dependence and agency theories with previous research on executive salaries to develop an explanatory model of director compensation.  Data were collected from US firms at two points in time to assess the stability of these predictors.  Four variables were found to have a significant relationship with director compensation: Firm size, firm profitability, equity ownership by directors, and resource richness of the board.  However, the explanatory power of these variables appears to decline over time.  Practical implications of these results are discussed.

Keywords:

director compensation

resource dependence 

agency theory

structural models

Resources: