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Specifically, we examine whether internal governance, including outsidedirector compensation, and firm economic determinants add power to the model with just external pressure.
We examine linkages between outside influences, outsidedirector compensation and board effectiveness by focusing on a specific change in corporate governance.
A popular form of other benefits is outsidedirector retirement plans.
Thus, there appears to be an attempt to offset any potential agency conflict by requiring a larger percentage of outsidedirector compensation to be invested in equity.
Our results provide support for the monitoring hypothesis in which the change in outsidedirector compensation is consistent with an increase in board effectiveness and firm performance.
Given the significance of the external pressure variables, we test whether internal governance (including outsidedirector compensation) and firm economic determinants significantly add explanatory power to the model.
As a result of using a management resolution not only is more information revealed in the proxy but every investor's attention is drawn to the change in outsidedirector compensation.
Investor rights pressure and outsidedirector compensation and not takeover risk or institutional ownership best explain firms altering outside director compensation, with board of director effectiveness improving.
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