Study 2. The Role of the Board in Setting CEO Base Salary and Bonus

Study 2. The Role of the Board in Setting CEO Base Salary and Bonus

The board of directors has been identified as a central element in determining levels of CEO compensation Theory suggests that CEOs will attempt to circumvent board control in an effort to minimize personal risk. A randomly selected subset of 'Fortune 1000' firms was used to examine the relationship between compensation and board control. Board control was measured by CEO duality, the ratio of insiders, director compensation, director equity holdings, and board representation by ownership groups CEOs were expected to prefer a proportionately larger base salary, while boards were expected to prefer a grater emphasis on bonus. This hypothesis was supported