Moderators of the Relationship Between Director Stock-Based Compensation and Firm Performance
Department
Management and Entrepreneurship
Document Type
Article
Publication Date
11-2007
Abstract
Research on the efficacy of stock-based compensation for outside directors has documented a weak or non-existent relationship with firm performance. Other variables also influence the relationships between these two constructs. Consistent with agency theory, we show, for a sample of 450 Standard & Poor 500 firms over the 1995–97 period that the use of director stock options and grants ratios was more strongly associated with positive performance in firms with (a) higher investment opportunities, and (b) weaker external monitoring. These findings have implications for compensation committees in the structuring of director compensation.
Journal Title
Corporate Governance
Journal ISSN
0964-8410
Volume
15
Issue
6
First Page
1384
Last Page
1393
Digital Object Identifier (DOI)
10.1111/j.1467-8683.2007.00652.x