Influence of the Board and Ownership Concentration on the Misalignment between Executive Compensation and Performance
DOI:
https://doi.org/10.51341/cgg.v26i2.3063Keywords:
Agency Theory, Corporate governance, Executive Compensation, Board, Shareholding ConcentrationAbstract
Objective: Analyze the influence of the board and ownership concentration on the misalignment between executive compensation and performance.
Method: Descriptive and quantitative research using secondary data from 196 companies listed on B3 – Brazil Stock Exchange and Over-the-Counter Market between 2010 and 2021, treated by panel data regression.
Originality/Relevance: Generally, studies assess the relationship and sensitivity between the level of remuneration and performance; this study advances by addressing determinants and investigating factors capable of affecting the portion of remuneration that is not explained by performance, which may be disconnected from a direct contribution to shareholders.
Results: The main results indicate that more extensive and independent boards have difficulty defining remuneration packages as they increase levels of misaligned remuneration. Likewise, more directors concerning advisors increase misalignment, increasing agency costs. Regarding shareholding concentration, the results highlight the importance of not being concentrated on the first two shareholders, as their monitoring could not reduce the problem of misalignment.
Theoretical/methodological contributions: Contributes to identifying risks for companies linked to more extensive and independent boards and the more significant number of executives per board member, as they aggravate the principal-agent problem. Provides evidence that increased ownership by a third significant shareholder can promote alignment of interests. In this way, it contributes to decisions to improve the structure and governance processes.
Downloads
References
Aguiar, A. B., & Pimentel, R. C. (2017). Remuneração de executivos e desempenho no mercado brasileiro: relações contemporâneas e defasadas. Revista de Administração Contemporânea, 21(4), 545-568. https://doi.org/10.1590/1982-7849rac2017160228
Aguilera, R.V., Desender, K., Bednar, M. K., & Lee, J. H. (2015). Connecting the dots: bringing external corporate governance into the corporate governance puzzle. Academy of Management Annals, 9(1), 483–573. https://doi.org/10.5465/19416520.2015.1024503
Akram, F., Abrar Ul Haq, M, & Umrani, W. A. (2019). Assessing the effect of managerial power on firm performance through the perceptual lens of executive remuneration. Journal of Social Sciences & Humanities, 27(1), 293-309, https://mpra.ub.uni-muenchen.de/100050/
Andrade, L. P. de, Salazar, G. T., & Calegário, C. L. L., & Silva, S. S. (2009). Governança Corporativa: Uma análise da relação do conselho de administração com o valor de mercado e desempenho das empresas brasileiras. Revista de Administração Mackenzie, 10(4), 4-31. https://doi.org/10.1590/S1678-69712009000400002
Araújo, J. A. O., & Ribeiro, M. S. (2017). Trinta anos de pesquisa em Remuneração Executiva e Retorno para o Acionista. Revista de Educação E Pesquisa Em Contabilidade, 11(0), 21–40. https://doi.org/10.17524/repec.v11i0.1622
Ataay, A. (2018). Performance sensitivity of executive pay: the role of ownership structure, board leadership structure and board characteristics. Economic Research-Ekonomska Istraživanja, 31(1), 1152-1168. https://doi.org/10.1080/1331677X.2018.1456951
Barkema, H. G., & Gomez-Mejia, L. R. (1998). Managerial compensation and firm performance: a general research framework. Academy of Management Journal, 41(2), 135-145. https://doi.org/10.5465/257098
Bebchuk, L. A., & Fried, J. M. (2005). Executive compensation as an agency problem. Journal of Economic Perspectives, 17, 71–92. https://doi.org/10.1257/089533003769204362
Bebchuk, L. A., Fried, J., & Walker, D. (2002). Managerial Power and Rent Extraction in the Design of Executive Compensation. National Bureau of Economic Research. https://doi.org/10.3386/w9068
Bebchuk, L. A., & Weisbach, M. S. (2010). The state of corporate governance research. Review of Financial Studies, 23(3), 939–961. https://doi.org/10.1093/rfs/hhp121
Berk, J., & Demarzo, P. (2010). Finanças empresariais. Porto Alegre: Bookman.
Brandão, I. F., Vasconcelos, A. C., & Luca, M. M. M. de. (2019). Composição do conselho de administração e sensibilidade da remuneração executiva ao desempenho de mercado. Revista Contabilidade e Finanças, 30(79), 28-41. https://doi.org/10.1590/1808-057x201806610
Cao, J., Pan, X., & Tian, G. (2011). Disproportional ownership structure and pay-performance relationship: evidence from China’s listed firms. Journal of Corporate Finance, 17(3), 541-554. https://doi.org/10.1016/j.jcorpfin.2011.02.006
Chhaochharia, V., & Grinstein, Y. (2009). CEO compensation and board structure. The Journal of Finance, 64(1), 231-261. https://doi.org/10.1111/j.1540-6261.2008.01433.x
Conyon M. J., & He, L. (2011). Executive compensation and corporate governance in China. Journal of Corporate Finance, 17(4), 1158–1175. https://doi.org/10.1016/j.jcorpfin.2011.04.006
Core, J. E., Holthausen, R. W., & Larcker, F. D. (1999). Corporate governance, chief executive compensation, and firm performance. Journal of Financial Economics, 51(3), 371-406. https://doi.org/10.1016/S0304-405X(98)00058-0
Correia, L. F., Amaral, H. G., & Louvet, P. (2014). Remuneração, composição do conselho de administração e estrutura de propriedade: evidências empíricas do mercado acionário brasileiro. Advances in Scientific and Applied Accounting, 7(1), 2-37, de https://asaa.anpcont.org.br/index.php/asaa/article/view/115
Crisóstomo, V. L., Brandão, I. F., & Lopéz-Iturriaga, F. J. (2020). Large shareholder’s power and the quality of corporate governance: An analysis of Brazilian firms. Research in International Business and Finance, 51, 1-15. https://doi.org/10.1016/j.ribaf.2019.101076
Croci, E., Gonenc, H., & Ozkan, N. (2012). CEO compensation, family control, and institutional investors in Continental Europe. Journal of Banking & Finance, 36(12), 3318–3335. https://doi.org/10.1016/j.jbankfin.2012.07.017
Degenhart, L., Martins, D. L. C. C., & Hein, N. (2017). Desempenho Econômico-Financeiro e Remuneração dos Diretores Executivos das Empresas Brasileiras. Enfoque: Reflexão Contábil, 36(3), 118-135. https://doi.org/10.4025/enfoque.v36i3.33129
Dyck, A., & Zingales, L. (2004). Private benefits of control: An international comparison. The Journal of Finance, 59(2), 537-600. https://doi.org/10.1111/j.1540-6261.2004.00642.x
Firth, M., Fung, P. M. Y., & Rui, O. M. (2007). How ownership and corporate governance influence chief executive pay in China’s listed firms. Journal of Business Research, 60(7), 776–785. https://doi.org/10.1016/j.jbusres.2007.01.014
Ernel, M. D. A., & Medeiros, V. (2020). Plano de Remuneração baseado em Ações: uma análise dos determinantes de sua utilização. Revista Contabilidade e Finanças, 31(82), 84-98. https://doi.org/10.1590/1808-057x201907620
Ernel, M. D. A., & Monte, P. A do. (2018). Controle Acionário, Remuneração de Executivos e Desempenho Empresarial: Evidências para o Mercado Brasileiro. Revista Brasileira de Finanças, 16(3), 455-491. http://dx.doi.org/10.2139/ssrn.2963481
Essen, M., Otten, J., & Carberry, E. J. (2015). Assessing managerial power theory: A meta analytic approach to understanding the determinants of CEO compensation. Journal of Management, 41(1), 164-202. https://doi.org/10.1177/0149206311429378
Fraile, I. A., & Fradejas, N. A. (2013). Ownership structure and board composition in a high ownership concentration context. European Management Journal, 32(4), 646-657. https://doi.org/10.1016/j.emj.2013.10.003
Freitas, M. R. O., Pereira, G. M., Vasconcelos, A. C. de., & Luca, M. M. M. de. (2020). Concentração Acionária Conselho de Administração e Remuneração de Executivos. Revista de Administração de Empresas, 60(5), 322-335. https://doi.org/10.1590/S0034-759020200503
Frydman, C., & Jenter, D. (2010). CEO compensation. Annual Review of Financial Economics, 2, 75-102.
Granzotto, A., & Sonza, I. B. (2019). Compensar ou monitorar os executivos? Revista de Administração, Contabilidade e Economia, 18(3), 393-418. https://doi.org/10.18593/race.20740
Hartzell, J. C., & Starks, L. T. (2003). Institutional investors and executive compensation. Journal of Finance, 58(6), 2351-2374. https://doi.org/10.1046/j.1540-6261.2003.00608.x
Instituto Brasileiro de Governança Corporativa – [IBGC] (2015). Código de melhores práticas de governança corporativa. (5. ed.) São Paulo: IBGC.
Iglesias, T. M. G., Silva, T. D., Jesuka, D., Peixoto, F. M. (2022). Reflexos da Governança Corporativa sobre a pay-performance sensitivity: Uma nova perspectiva. Revista de Administração Mackenzie, 23(1), 1-27. https://doi.org/10.1590/1678-6971/eRAMF220088
Jensen, M., & Meckling, W. (1976). Theory of the firm: managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
Jensen, M. C. (1993). The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. The Journal of Finance, 48(3), 831-880. https://doi.org/10.1111/j.1540-6261.1993.tb04022.x
Jensen, M. C. (1998). Foundations of organizational strategy. Cambridge: Harvard University Press.
Jiang, H., Habib, A., & Smallman, C. (2009). The effect of ownership concentration on CEO compensation-firm performance relationship in New Zealand. Pacific Accounting Review, 21(2), 104-131. https://doi.org/10.1108/01140580911002053
Johnson, J. L., Daily, C. M., & Ellstrand, A. E. (1996). Boards of directors: A review and research agenda. Journal of Management, 22(3), 409–438. https://doi.org/10.1177/014920639602200303
La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. The Journal of Finance, 54(2). https://doi.org/10.1111/0022-1082.00115
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1-2), 3–27. https://doi.org/10.1016/s0304-405x(00)00065-9
Lei n. 14.095, de 26 de agosto de 2021. (2021). Dispõe sobre a proteção de acionistas minoritários. Diário Oficial da União. Secretária-geral.
Lei n. 6.404, de 15 de dezembro de 1976. (1976). Dispõe sobre as Sociedades por Ações. Diário Oficial da União. Casa Civil.
Leite, M., & Hein, N. (2019). Relação entre Remuneração dos Executivos e o Desempenho Econômico e Financeiro em Empresas Brasileiras. Revista de Gestão, Finanças e Contabilidade, 9(1), 17-36. https://doi.org/0.18028/rgfc.v9i1.6078
Linck, J., Netter, J., & Yang, T. (2008). The determinants of board structure. Journal of Financial Economics, 87(2), 308–328. https://doi.org/10.1016/j.jfineco.2007.03.004
Luo, Y. (2015). CEO power, ownership structure and pay performance in Chinese banking. Journal of Economics and Business, 82, 3-16. https://doi.org/10.1016/j.jeconbus.2015.04.003
Marquezan, L. H. F., Velho, M. L. P., & Zonatto, V. C. da S. (2021). Análise das relações entre independência do conselho de administração e o desalinhamento entre remuneração executiva e desempenho organizacional. In: Anais do International Conference in Management and Accounting - Congresso de Gestão e Controladoria da Unochapecó - Congresso FURB de Ciências Contábeis - Congresso de Iniciação Científica. Anais[...] Chapecó, SC. https://even3.blob.core.windows.net/anais/401358.pdf
Morck, R., Wolfezon, D., & Yeung, B. (2005). Corporate Governance, Economic Entrenchment, and Growth. Journal of Economic Literature, 43(3), 655-720. https://doi.org/10.1257/002205105774431252
Parente, T. C., & Machado Filho, C. A. P. (2020). Conselhos de administração no Brasil: Revisão da literatura e agenda de pesquisa. Revista de Administração Mackenzie, 21(6), 1-33. https://doi.org/10.1590/1678-6971/eRAMD200066
Santos, T. R. dos, & Silva, J. O. da. (2019). Desempenho econômico e financeiro e remuneração de executivos em empresas brasileiras familiares e não familiares dos segmentos cíclico e não cíclico. Revista Universo Contábil, 15(4), 7-30. http://dx.doi.org/10.4270/ruc.2019425
Santos, R. C., Orso, L. E., Lizote, S. A., & Marcon, R. (2018). Board of directors: The perspective of independents in the performance of private organizations? Evidences in Brazil. Revista de Administração Mackenzie, 19(4), 1–27. https://doi.org/10.1590/1678-6971/eRAMF180003
Sarhan, A. A., Ntim, C. G., & Al-Najair, B. (2019). Board diversity, corporate governance, corporate performance, and executive pay. International Journal of Finance & Economics, 24(2), 761-786. https://doi.org/10.1002/ijfe.1690
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Silva, R. B., Silva, D. S. de C., Luca, M. M. M. de., & Vasconcelos, A. C. de. (2018). Remuneração dos Executivos e Indicadores de Desempenho em Empresas participantes do Ibovespa. Revista de Administração, Contabilidade e Economia, 17(3), 867-888. http://dx.doi.org/10.18593/race.v17i3.16721
Silveira, A. D. M. da. (2010). Governança corporativa no Brasil e no mundo. Rio de Janeiro: Elsevier.
Silveira, A. D. M. da, Barros, L. A. B. de C., & Famá, R. (2008). Atributos Corporativos e Concentração Acionária no Brasil. Revista de Administração de Empresas, 48(2), 51-66. https://doi.org/10.1590/S0034-75902008000200005
Souza, P. V. S. de., Cardoso, R. L., & Vieira, S. S. C. (2017). Determinantes da remuneração dos executivos e sua relação com o desempenho financeiro das companhias. Revista Eletrônica de Administração, 23, 4-28. https://doi.org/10.1590/1413-2311.175.63859
Taylor, S. L. (1994). Executive share options: An economic framework. Australian Accounting Review, 4(2), 13-21. https://doi.org/10.1111/j.1835-2561.1994.tb00154.x
Theiss, V., & Beuren, I. M. (2017). Estrutura de Propriedade e Remuneração de Executivos. Revista de Administração UFSM, 10(3), 533-550. https://doi.org/10.5902/19834659
Tirole, J. (2006). The theory of corporate finance. Princeton: Princeton University Press
Van Ees, H., Gabrielsson, J., & Huse, M. (2009). Toward a behavioral theory of boards and corporate governance. Corporate Governance: An International Review, 17(3), 307–319. https://doi.org/10.1111/j.1467-8683.2009.00741.x
Vieira, C. A. M, & Silva, O. M. (2018). Influência da estrutura do conselho de administração e do controle corporativo no turnover do CEO das empresas abertas no Brasil. Revista Contemporânea de Contabilidade, 15(34), 181-201. http://dx.doi.org/10.5007/2175-8069.2018v15n34p181
Wang, K., & Xiao, X. (2011). Controlling shareholders’ tunneling and executive compensation: Evidence from China. Journal of Accounting and Public Policy, 30(1), 89-100. https://doi.org/10.1016/j.jaccpubpol.2010.09.014
Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20(1), 431-460. https://doi.org/10.1016/0304-405X(88)90053-0
Wood JR., T., & Picarelli Filho, V. (2004). Remuneração e Carreira por Habilidades e por Competências. São Paulo: Atlas.
Zorn, M. L., Shropshire, C., Martin, J. A., Combs, J. G., & Ketchen, D. J. Jr. (2017). Home alone: the effects of lone-insider boards on CEO pay, financial misconduct, and firm performance. Strategic Management Journal, 38(13), 2623-2646. https://doi.org/10.1002/smj.2661
Downloads
Published
How to Cite
Issue
Section
License
The authors hold the copyright to their article and grant the Journal of Accounting, Management and Governance the exclusive rights of first publication (including communication to the public and reproduction), with the work simultaneously licensed under the Creative Commons Attribution Non-Commercial 4.0 International License (CC BY-NC).
This license allows third parties to remodel, adapt, and create from the published work, as long as it is for non-commercial purposes, giving due credit for authorship and initial publication in this journal.
Authors are permitted to enter into additional separate agreements for non-exclusive distribution of the version of the work published in this journal (e.g., publish in an institutional repository, on a personal website, publish a translation, or publish a book chapter), with acknowledgment of authorship and initial publication in this journal, provided there is no commercial use/distribution.
