What motivates directors to pursue long-term strategic risks? Economic incentives vs. fiduciary duty

Shaikh, Ibrahim; Drira, Mohamed; Hassine, Sana Ben

doi:10.1016/j.jbusres.2019.04.022

Cited by 11 publications

(4 citation statements)

References 73 publications

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“…Last but not less, this bibliometric analysis also highlights the fact that the corporate ownership structure in its different dimensions is also relevant for corporate governance. Much work remains undone in this aspect, such as, considerations of family ownership and generational successions, assessment of the efficiency of the different investors as • Poor performance and the number of hiring directors are positively related to the increment in CEO pay and negatively related to likelihood of CEO dismissal • The bias among hiring directors can be mitigated via experience Borisova et al (2019) • CEO equity-linked wealth in privatized firms is less sensitive to stock performance, and equity remuneration is negatively related to government ownership stakes • Privatized companies take less risk than non-privatized companies Shaikh et al (2019) • The pressures imposed on a board through external regulations and controls often result in outside directors signing off on less risky expenditures Banerjee and Homroy (2018)…”

Section: Corporate Governance and Remuneration Reviewmentioning

confidence: 99%

Corporate governance and remuneration: a bibliometric analysis

Mumu

Saona

Russell

et al. 2021

JABES

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PurposeThis study aims to pinpoint gaps in the literature on corporate governance and remuneration by producing a comprehensive bibliometric review for the period 1990–2020.Design/methodology/approachBibliometric analysis is the quantitative study of the bibliographic material in a specific research field. It allows an analyst to classify that material by paper, journal, author, indexation, institution or country, among other possibilities. This study reviews a total of 298 Web of Science–indexed journal articles on corporate governance and top-management remuneration schemes.FindingsThe authors find five distinct research strands: (1) firm performance and remuneration of top management, (2) the remuneration and independence of boards of directors and the efficiency of boards of directors as a governance system, (3) outside-director remuneration and the efficiency of outside directors as a monitoring system, (4) director remuneration and the corporate governance of companies and (5) the role of ownership structure and top managers' compensation schemes as corporate-governance tools. The authors identify gaps in the literature and avenues for future research for each of these strands.Practical implicationsThe authors’ findings have implications for board diversity (e.g. gender diversity), remuneration policy for top-level managers and governance issues (independent directors, separation of ownership with control). This study is the only one to summarize the key topics on which top research has been focused and can be broadly used for corporate governance management perspective.Originality/valueThis paper provides an overview of how the literature on corporate governance and remuneration has developed and a synopsis of the most influential and most productive authors, countries and journal sources. It creates an opportunity for other researchers to focus on this area. This study will also serve as a foundation for future meta-analyses.

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Section: Corporate Governance and Remuneration Reviewmentioning

confidence: 99%

Corporate governance and remuneration: a bibliometric analysis

Mumu

Saona

Russell

et al. 2021

JABES

View full text Add to dashboard Cite

show abstract

“…Finding the balance between risk management and achieving the strategy of an organisation is becoming a critical role for board directors. Recent research highlights the importance of understanding director motivation, the role of incentives and therefore the importance of culture in this area of business (Shaikh et al 2019 ). Some of the high-profile risks in this area are big data, cryptocurrency, blockchain, artificial intelligence (AI), remote working technologies, the sharing economy and crowdsourcing (Brennan et al 2019 ).…”

Section: Literature Reviewmentioning

confidence: 99%

Questions that board directors should be asking about emerging governance issues and risk: a practitioner’s view and implications for the extractive industries

Guerin¹

2021

Miner Econ

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This article synthesises and highlights outcomes from a governance and risk forum that identified emerging risks for businesses and organisations. A governance framework is first presented followed by a discussion of recent developments in relation to elements of the framework as part of a mini-review of the literature. Emerging risks and opportunities around the changing nature of work, corporate culture, blockchain and cyber security were highlighted, with a particular emphasis on climate-related risks. Key questions to ask as a non-executive director or governance and risk committee members regarding these risks include could our sector or organisation be impacted by these emerging risks and opportunities? What could be the implications if these risks were to materialise and to what extent will our current business and operating model be impacted? How could our organisation be seizing the opportunity created by the pending changes in these areas? The findings and implications of the governance and risk issues are highlighted for the extractives sector and are especially important as the extractive sector faces challenges in its transformation. The study is novel as it highlights insights from the practitioner perspective of governance which is not captured in the literature. Recommended remedies for each risk are provided, and businesses are advised to undertake a focused review of non-financial risks, including corporate or organisational culture.

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“…Most studies involving director incentives so far have focussed on the absolute and/or the intrinsic values of the rewards with mixed findings (Nguyen, 2014; Bhagat and Bolton, 2019; Shiah-Hou and Cheng, 2012; Acero and Alcalde, 2020; Shaikh et al , 2019; Agrawal and Nasser, 2019a). On one hand, several empirical studies have reported a positive relationship between the absolute director pay and certain firm performance measures including Tobin’s Q and return on assets (Chowdhury and Wang, 2019; Magnan et al , 2010; Shaikh et al , 2019). On the other hand, some researchers argue that director performance is likely driven by the intrinsic value of the directorship instead of the financial incentives (Eisenhardt, 1989; Masulis and Mobbs, 2014; Ryan and Wiggins, 2004; Collins and Nacasius, 2020).…”

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The role of director incentives in investment efficiency

Zhang

Michael²

2023

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Purpose The existing literature involving director compensation has been concentrating on its absolute or intrinsic values. Although the relevant studies have generated mixed findings, research in other fields suggests that the power of an incentive may be determined by its value relative to the chosen referencing standard more than its absolute value. This study aims to investigate how relative director pay affects corporate investment efficiency. Design/methodology/approach This study takes a fresh theoretical viewpoint by framing the investigation using the dimensional comparison theory and proposing that a directorship also presents a relative value that may influence the board’s performance. Ordinary least squared regressions and two-stage system generalised method of moments are used to analyse 14,267 firm-year observations. Findings The empirical results suggest that the relative director pay is a better estimate of the power of the incentive than the absolute pay. A positive association between the relative director pay and investment efficiency is evident, while the absolute pay has no significant effect on investment decisions. Director overcompensation, however, will cancel out the positive effect of director compensation on investment efficiency. Firms with relatively lower unexpected investment (UI) level benefit the most from an increase in the relative director pay, while neither absolute nor relative director pay affects investment choices in firms with a high UI level because of significantly more overcompensation. Originality/value To the best of the authors’ knowledge, this study is the first attempt to investigate the effect of relative director pay. It is also the first to examine the role of dimensional comparison in strategic decisions which is the single untended comparison framework in the director pay design. The current director pay structure has emphasised social and temporal equality by standardising the pay structure and vesting the equity-based pay over a long period. Yet it ignores the fact that people decide their commitment level by comparing the reward with an internal referent too. The findings speak to the dimensional comparison theory in that the inequality emanated from dimensional or internal comparison may be accentuated by the perceived equality in other comparison frameworks, driving the different performances in the roles one assumes.

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What motivates directors to pursue long-term strategic risks? Economic incentives vs. fiduciary duty

Cited by 11 publications

References 73 publications

Corporate governance and remuneration: a bibliometric analysis

Corporate governance and remuneration: a bibliometric analysis

Questions that board directors should be asking about emerging governance issues and risk: a practitioner’s view and implications for the extractive industries

The role of director incentives in investment efficiency

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