The empirical results show that more independent compensation committees are negatively associated with CEO compensation and positively associated with CEO turnover. Interested readers are welcomed to ask the author for a complete copy of this paper.
REFERENCES
Adams, R. B. and D. Ferreria. 2008. Do directors perform for pay? Journal of Accounting and Economics 46 (1): 154–71.
Adams, R. B. and D. Ferreria. 2009. Women in the boardroom and their impact on governance and performance. Journal of Financial Economics 94 (1): 291–309.
Anderson, R., and J. Bizjak. 2003. An empirical examination of the role of the CEO and the compensation committee in structuring executive pay. Journal of Banking and Finance 27(7): 1323-1348.
Archambeault, F.T. Dezoort, and D. Hermanson. 2008. Audit committee incentive compensation and accounting restatements. Contemporary Accounting Research 25 (4): 965–992.
Balachandran, S., B. Kogut, and H. Harnal. 2010. Did Executive Compensation Encourage Excessive Risk‐taking in Financial Institutions? Working paper. Columbia University.
Beasley, M.S. 1996. An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review 71 (4): 443-466.
Beasley, M.S., J.V. Carcello, R. Hermanson, and T. Neal. 2009. The audit committee oversight process. Contemporary Accounting Research 26 (1): 65–122.
Bebchuk, L.A. and J.M. Fried. 2003. Executive compensation as an agency problem. Journal of Economic Perspectives 17: 71–92.
Bebchuk, L.A. and J.M. Fried. 2004. Pay Without Performance. Harvard University Press:
Cambridge, MA.
Bedard, J.C., S.M. Chtourou, and L. Courtean. 2004. The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory 23 (2): 13–35.
Bertrand, M. and S. Mullainathan. 2001. Are CEOs rewarded for luck? The ones without principals are. Quarterly Journal of Economics 116: 901–932.
Brick, I. E., O. Palmon and J. K. Wald. 2006. CEO Compensation, director compensation, and firm performance: Evidence of cronyism. Journal of Corporate Finance 12 (3): 403-423.
Bronson, S., J. Carcello, C. Hollingsworth, and T. Neal. 2009. Are fully independent audit committees really necessary? Journal of Accounting and Public Policy 28 (4): 265–80.
Butler, M., A. J. Leone, and M. Willenborg. 2004. An empirical analysis of auditor reporting and its association with abnormal accruals. Journal of Accounting and Economics 37 (1):
139-165.
Carcello, J. V., and T. L. Neal. 2003. Audit committee characteristics and auditor dismissals following ‘‘new’’ going-concern reports. The Accounting Review 78 (1): 95–117.
Carcello, J. V., T.L. Neal, Z-V Palmrose, and S. Scholz. 2011. CEO involvement in selecting board members, audit committee effectiveness, and restatements. Contemporary Accounting Research 28: 396-430.
Chhaochharia, V. and Y. Grinstein. 2009. CEO compensation and board structure. Journal of Finance 64 (1): 231-261.
Conyon, M.J. and S. Peck. 1998. Board control, remuneration committees, and top management compensation. Academy of Management Journal 41: 146-157.
U.S. entrepreneurial firms. Journal of Management Accounting Research16: 35-56.
Core, J.E., R.W. Holthausen, and D.F. Larcker. 1999. Corporate governance, CEO compensation, and firm performance, Journal of Financial Economics 51 (2): 371–406.
Craig. S and K. Kelly. 2003. Greed Plans NYSE Board Overhaul. Wall Street Journal (October 29):
A1.
Cyert, R., S.H. Kang, and P. Kumar. 2002. Corporate governance, takeovers, and top-management compensation: Theory and evidence. Management Science 48: 453–469.
Daily, C., J. Johnson, A. Ellstrand., and D. Dalton. 1998. Compensation committee composition as a determinant of CEO compensation. Academy of Management Journal 41(2): 209-220.
Dechow, P., W. Ge, C. Larson, and R. Sloan. 2011. Predicting material accounting misstatements.
Contemporary Accounting Research 28: 17-82.
Demerjian, P.R., B. Lev, M.F. Lewis, and S.E. McVay. 2013. Managerial ability and earnings quality. The Accounting Review 88 (2): 463-498.
DeZoort, T., D. R. Hermanson, D. S. Archambeault, and S. A. Reed. 2002. Toward a theory of audit committee effectiveness: A synthesis of the empirical audit committee literature. Journal of Accounting Literature 21 (1): 38–75
Dhaliwal, D., V. Naiker, and F. Navissi. 2010. The association between accrual quality and the characteristics of accounting experts and mix of expertise on audit committee.
Contemporary Accounting Research 27 (3): 787-827.
Dittmar, A. and J. Mahrt-Smith. 2007. Corporate governance and the value of cash Holdings.
Journal of Financial Economics 83: 599-634.
Engel, E., R. Hayes, and X. Wang. 2010. Audit committee compensation and the demand for monitoring of the financial reporting process. Journal of Accounting and Economics 49 (1): 136-154.
Fama, E.F. 1980. Agency problems and the theory of the firm. Journal of Political Economics 88:
288–307.
Fama, E.F. and K.R. French. 1997. Industry cost of equity. Journal of Financial Economics 43:
153–193.
Fama, E.F. and M.C. Jensen. 1983. Separation of ownership and control. Journal of Law and Economics 26: 301–325.
Fan, J.P.H. and T.J. Wong. 2005. Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia. Journal of Accounting Research 43 (2):
35-72.
Fich, E. M. and A. Shivdasani. 2006. Are busy boards effective monitors? Journal of Finance 61:
689-724.
Gompers, P., J. Ishii, and A. Metrick. 2003. Corporate governance and equity prices. Quarterly Journal of Economics 118: 107-155.
Hartzell, J.C. and L.T. Starks. 2003. Institutional investors and executive compensation. Journal of Finance 58: 2351–2374.
Hermalin, B. and M. S. Weisbach. 1998. Endogenously chosen boards of directors and their monitoring of the CEO. American Economic Review 88 (1): 96-118.
Finkelstein, S. and D. Hambrick. 1996. Strategic Leadership: Top Executives and their Organizations. Minneapolis: West Publishing Company.
Gerety, M., and K. Lehn. 1997. The causes and consequences of financial fraud. Managerial and Decision Economics 18 (7/8): 587-99.
Grinstein, Y. and P. Hribar. 2004. CEO compensation and incentives: Evidence from M&A bonuses. Journal of Financial Economics 73: 119–143.
Hanlon, M., S. Rajgopal, and T.J. Shevlin. 2003. Are executive stock options associated with future earnings. Journal of Accounting & Economics 36 (1-3): 3-43.
Hoitash, U., and R. Hoitash. 2009. Conflicting objectives within the board: Evidence from overlapping audit and compensation committee members. Group Decision and Negotiation 18 (1): 57–73.
Hallock, K.F. 1997. Reciprocally interlocking boards of directors and executive compensation.
Journal of Financial and Quantitative Analysis 32: 331–344.
Hermalin, B. and M. S. Weisbach. 2003. Boards of directors as an endogenously determined institution: A survey of the economic literature. Economic Policy Review, Federal Reserve Bank of New York: 7-26.
Krishnan, G., and G. Visvanathan. 2008. Does the SOX definition of an accounting expert matter?
The association between audit committee directors’ accounting expertise and accounting conservatism. Contemporary Accounting Research 25 (3): 827-857.
Lambert, R., D. Larcker, and K. Weigelt. 1993. The Structure of Organizational Incentives.
Administrative Science Quarterly (38): 438-461.
Laux, C and V. Laux. 2009. Board committees, CEO compensation, and earnings management. The Accounting Review 84 (3): 869–91.
Lennox, C., and C. Park. 2007. Audit firm appointments, audit firm alumni, and audit committee independence. Contemporary Accounting Research 24 (1): 235–58.
Magilke, M., W. Mayhew, and J. Pike. 2009. Are Independent audit-committee members objective?
Experimental Evidence. The Accounting Review 84 (6):1959–1981.
Menon, K. and J.D. Williams. 1994. The use of audit committees for monitoring. Journal of Accounting and Public Policy 13 (2): 121 –39.
Menon, K. and D.D. Williams. 2004. Former audit partners and abnormal accruals. The Accounting Review 79 (4): 1095–118.
Menon, K. and D.D. Williams. 2008. Management turnover following auditor resignations.
Contemporary Accounting Research 25 (2): 567–604.
Milgrom, P., and J. Roberts. 1992. Economics, Organizations, and Management. Englewood Cliffs, NJ: Prentice Hall.
Monks, R.A. and N. Minow. 2011. Corporate Governance, 5th Edition. John Wiley & Sons.
Murphy, K., and T. Sandino. 2010. Executive pay and “independent” compensation consultants.
Journal of Accounting and Economics 49(3): 247-262.
Naiker, V., and D.S. Sharma. 2009. Former audit partners on the audit committee and internal control deficiencies. The Accounting Review 84 (2):559–87.
Naiker, V., D.S. Sharma, and V.D. Sharma. 2013. Do former audit firm partners on audit committees procure greater nonaudit services from the auditor?. The Accounting Review 88 (1): 297-326.
National Association of Corporate Directors (NCSD). 2001. Director compensation: Purposes, principles, and best practices. Washington DC: NACD.
2002-2003. Washington DC: NACD.
Newman, H. and H. Mozes. 1999.Does the composition of the compensation committee influence CEO compensation practices? Financial Management 28(3): 41-53.
Poerio, J.M., S.H. Harris, E.A. Razzano, and M.A. Gordon. 2013. NYSE and NASDAQ Issue Final Listing Rule Changes for Compensation Committees and Compensation Advisers. Stay Current (February), Paul Hasting LLP.
Sloan, A. 2003. Our Wall Street Editor's Take on Dick Grasso's Payday. Newsweek (September 22):
33-34.
Spatt, C. 2006. Executive compensation and contracting. Working paper, SEC and Carnegie Mellon University.
Srinivasan, S. 2005. Consequences of financial reporting failure for outside directors: Evidence from accounting restatements and audit committee members. Journal of Accounting Research 43 (2): 291–334.
Thorburn, K.S. 1997. Comment on top management compensation and the structure of the board of directors in commercial banks. European Finance Review 1: 261–264.
Vafeas, N. 2003a. Further evidence on compensation committee composition as a determinant of CEO compensation. Financial Management 32(2): 53-70.
Vafeas, N. 2003b.Length of board tenure and outside director independence. Journal of Business Finance and Accounting 30(7/8): 1043–64.
Wade, J., C. A. O’Reilly., and I. Chandratat. 1990. Golden parachutes: CEOs and the exercise of social influence. Administrative Science Quarterly 35 (4): 587–603.
Weisbach, M. 1988. Outside directors and CEO turnover. Journal of Financial Economics 20:
431–460.
Williamson, O.E. 1984. Corporate governance. Yale Law Journal 39: 1197-1230.
Yermack, D. 1996. Higher market valuation of companies with a small board of directors. Journal of Financial Economics 40: 185–211.
Yermack, D. 2004. Remuneration, retention, and reputation incentives for outside directors. Journal of Finance 99 (5): 2381-2208.
Zajac, E. J. and J.D. Westphal. 1996. Director reputation, CEO-Board power, and the dynamics of board interlocks. Administrative Science Quarterly 41 (3): 507-529.