CEO Compensation, Expropriation, and the Balance of Power among Large Shareholders

Does the fellow‐villager relationship between the independent director and the chairman of the board can inhibit the major shareholder expropriation? Evidence from China

“…The previous studies have shown that, due to the lack of external information disclosure, imperfect legal system, high degree of ownership concentration, and lack of internal supervision and balance mechanism, the major shareholders can easily maximize their personal interests by influencing the investment and financing decisions and transaction decisions of enterprises and even directly occupy the company's cash (Myor, 1984). Many literatures focusing on the governance of major shareholders' encroachment are mainly carried out from the perspectives of internal and external check and balance mechanism of the company, which have shown that the improvement of the relevant legislation of investor protection, as well as the quality of audit, and the strengthening of internal supervision can effectively restrain the expropriation of major shareholders (Chen et al, 2018; Luo & Jackson, 2012). In particular, some scholars pointed out that the optimization of the structure of the board of directors, for example, reducing the proportion of family members in the board of directors (Bozec & Laurin, 2008), especially increasing the number of independent directors, or consolidating the supervision function of independent directors by improving relevant systems, are considered to be effective ways to curb the expropriation of major shareholders (DiVito & Bozec, 2012).…”

“…This article utilizes the ratio of the company's largest shareholder holdings to the total shareholding of the top five shareholders as the measure for equity checks and balances (Luo & Jackson, 2012). According to the descriptive nature of the variable, the mean value of the variable BS is 1.606, and the standard deviation is 0.56, indicating that the shareholding ratio of the first largest shareholder is generally high, and a few companies still have the phenomenon of “one big share.” Table 11 shows the regression results of the adjustment mechanism of equity checks and balances.…”

“…However, under the current situation that China's directors' human capital market is not perfect, in addition to professional reputation, the reputation mechanism of independent directors depends largely on social reputation. The inaction or misconduct of independent directors will seriously affect their personal social reputation and career prospects once they are exposed by the media (Luo & Jackson, 2012). From the perspective of the influence of the relationship between the independent director and the chairman on the encroachment of major shareholders, in the context of the high concentration of equity in the listed companies in China, the nomination of independent directors is actually monopolized by the major shareholders and the chairman (Zhou et al, 2016).…”

“…This article refers to the study of Luo and Jackson (2012), and utilizes the celebrity effect of independent directors to measure the reputation of independent directors. Through web crawling technology, we used the name of independent directors and the company name (stock code) as the key combination, in the meantime, we used the method of searching one by one every year to count the number of news retrievals of independent directors in Internet news.…”

Does CEO duality give more influence over executive pay to the majority or minority shareholder? (A survey of Brazil)

“…Accordingly, in terms of the governance structure of Brazil's firms, the agency conflict that exists is not between management and owners, but majority owner's objectives in contrast with those of the minority. Literature therefore explains that this relationship provides blockholders with an advantageous position of influence in the organisation (Luo and Jackson, 2012).…”