My first essay examines compensation of newly formed boards of directors following tax-free corporate spin-offs. The empirical results show newly formed spin-off boards are paid significantly more than peer boards in the same industry with similar firm size. Higher compensation is observed for spin-off firms where the CEOs are not formerly employed by the parent firms but not for spin-off firms with parent related CEOs, indicating that new directors demand higher compensation for the work involved in setting up the new governing system for the spun-off firms especially when there is a brand new CEO managing the spinoff firm. Differences in the structure of director compensation are consistent with better incentive alignment for the newly formed spinoff boards who have the rare opportunity to design their compensation from scratch. The paper also finds evidence that limited CEO's influence on the composition of the spinoff board leads to weaker cronyism between the board and the CEO of spinoff firms. My second essay explores the role CEO gender plays in shaping the board of directors. The literature provides strong evidence that male CEOs are more overconfident than female CEOs. I contend that a male CEO, who may overestimate his ability and/or underestimate the monitoring role of the board, will prefer to exert as much control over the board as possible and thus prefer a weaker board. I find consistent results that new male CEOs are more likely to increase board size, decrease board independence, reduce board gender diversification, have worse director attendance and have lower overall board monitoring. In contrast, new female CEOs have more gender diversified boards and are associated with an increase in overall board monitoring intensity. I also find supporting evidence in terms of CEO compensation, where new male CEOs gain more control and are compensated more in both total compensation and equity compensation post transition, consistent with what we expect from a weaker board. My third essay examines CEO's influence on the board of directors in spinoff firms. CEO's influence on the board of directors has been the main concern for shareholders who entrust the firm board with the task of monitoring the firm CEOs. Current literature shows that the more powerful the CEO, the better he is able to extract rents via his compensation at the expense of shareholders. In this study, I utilize a sample of spinoff firms that need to form a brand new board of directors from scratch to shed more lights on the CEO influence question. Particularly, I hypothesize and find that since spinoff CEOs appointed from the parent firm have more influence over the selection of spinoff directors, they enjoy higher compensation with lower pay-performance sensitivity (PPS) and have lower turnover-performance sensitivity than CEOs at similar non-spinoff firms. In contrast, spinoff CEOs hired from outside the pre-spinoff business have similar compensation, PPS and turnover-performance sensitivity to their peers. The results provide supporting evidence for the CEO influence hypothesis and show that limiting CEO's involvement in the selection of directors might help mitigate subsequent CEO rent seeking behavior.
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Doctor of Philosophy (Ph.D.)
College of Business Administration
Business Administration; Finance
Length of Campus-only Access
Doctoral Dissertation (Open Access)
Pham, Duong, "Three Essays on the Compensation, Structure, and Decision Making of the Board of Directors" (2017). Electronic Theses and Dissertations. 5481.
Restricted to the UCF community until May 2018; it will then be open access.