THE COMPENSATION OF INDEPENDENT CORPORATE GOVERNANCE ACTORS AT BOARD-LEVEL EVIDENCE FROM DIFFERENT INSTITUTIONAL CONTEXTS

Literature related to directors’ compensation has grown in the last 30 years at a pace rivaled only by the growth of compensation itself. However, in spite of the pivotal role played by compensation and the recognized importance of independent corporate governance mechanisms at board-level, compensation’s literature related to these corporate governance actors did not soar as executive’s one. In order to highlight the relevance of this gap, I propose in the first study a summary of the theoretical background and the main conceptualizations with which compensation is designed. By doing so, I highlight how scholars might have undervalued some theoretical factors of compensation design and how this underestimation led to more than one gap in current literature. In particular, I highlight how prior studies undervalued the importance of the influence of contingent factors on the compensation of independent corporate governance actors at board-level. In addition, I underline how the (scarce) focus on independent corporate governance actors could not disentangle the effects that the functions performed had on the compensation received. For this reasons, I first examine the compensation of independent non-executive directors serving in non-financial listed companies composing the Standard & Poor’s 500 and the Eurostoxx600. By doing so, I contribute to the scant literature on these debated corporate governance mechanism, which mainly focused on a single institutional setting. In addition, studying separately, and jointly, level-specific factors (i.e. individual, firm and country) I also highlight how compensation is mold at different levels of analysis and how the underestimation of contingent factors may lead an oversimplification of the agency problem analyzed. Finally, I analyze the economic determinants of the compensation of the members of the board of statutory auditors. This particular corporate governance mechanism, which is typical of the Italian traditional board structure, acts merely as a monitor of the board of directors on behalf of the shareholders. By studying its compensation determinants I bypass the limit of prior literature which could not disentangle the effects that the activities performed by independent directors, i.e. advisory and monitoring, had on compensation. In addition, studying in an institutional context, such as the Italian one, in which the risk of collusion between agent and supervisor is higher than elsewhere, I highlight how the two perspectives encompassed in the agency framework (i.e. optimal contracting theory and managerial power approach) can co-exist at the individual-level.