Study on corporate governance practices and executive compensation presented in Croatia

According to the Agency Theory, good corporate governance practices contribute to reducing information asymmetries between shareholders and managers and, subsequently, the potential for managerial opportunism, thereby reducing the need for incentives to align interests.
Administration
10 May 2019
Study on corporate governance practices and executive compensation presented in Croatia

A study to identify the effect of the quality of corporate governance practices on executive compensation configurations and values ​​was presented during the “7th International OFEL Conference on Governance, Management and Entrepreneurship – 2019”, held on April 5-6, in Dubrovnik, Croatia. The work of Giselle Cilaine Ilchechen Coelho, a graduate from the Executive Master’s Degree in Business Management (MEX), and Joaquim Rubens and Felipe Buchibinder, professors at FGV’s Brazilian School of Public and Business Administration (EBAPE), is entitled “Effects of the Corporate governance practices on the executive compensation”.

According to the Agency Theory, good corporate governance practices contribute to reducing information asymmetries between shareholders and managers and, subsequently, the potential for managerial opportunism, thereby reducing the need for incentives to align interests.

In this sense, the study prepared three hypotheses relating the quality of the corporate governance practices of companies with the executive compensation values, conformity gap, and the participation of the CEO in relation to the other members of the company. These assumptions were verified by companies listed on the Brazilian Stock Exchange, characterized by the predominance of concentrated participation.

Based on a sample of 174 companies with higher liquidity, accounting for around 40% of the universe, and using as control variables the size of the company and its sector of activity, there were no significant effects of the quality of governance on compensation, structure of executive participation, or participation of the CEO in the totality of the C-Level. Nevertheless, a significant relationship was observed between the quality of governance and compliance with good compensation practices, evidencing a smaller compliance gap.

The results of the study, which was presented by Coelho in Croatia, contribute to the literature on governance and executive compensation while pointing to potential flaws in agency theory and information asymmetries as justification for executive compensation practices.

A study to identify the effect of the quality of corporate governance practices on executive compensation configurations and values ​​was presented during the “7th International OFEL Conference on Governance, Management and Entrepreneurship – 2019”, held on April 5-6, in Dubrovnik, Croatia. The work of Giselle Cilaine Ilchechen Coelho, a graduate from the Executive Master’s Degree in Business Management (MEX), and Joaquim Rubens and Felipe Buchibinder, professors at FGV’s Brazilian School of Public and Business Administration (EBAPE), is entitled “Effects of the Corporate governance practices on the executive compensation”.

According to the Agency Theory, good corporate governance practices contribute to reducing information asymmetries between shareholders and managers and, subsequently, the potential for managerial opportunism, thereby reducing the need for incentives to align interests.

In this sense, the study prepared three hypotheses relating the quality of the corporate governance practices of companies with the executive compensation values, conformity gap, and the participation of the CEO in relation to the other members of the company. These assumptions were verified by companies listed on the Brazilian Stock Exchange, characterized by the predominance of concentrated participation.

Based on a sample of 174 companies with higher liquidity, accounting for around 40% of the universe, and using as control variables the size of the company and its sector of activity, there were no significant effects of the quality of governance on compensation, structure of executive participation, or participation of the CEO in the totality of the C-Level. Nevertheless, a significant relationship was observed between the quality of governance and compliance with good compensation practices, evidencing a smaller compliance gap.

The results of the study, which was presented by Coelho in Croatia, contribute to the literature on governance and executive compensation while pointing to potential flaws in agency theory and information asymmetries as justification for executive compensation practices.