Board refreshment and director excess compensation

Mustafa A. Dah

Economics Letters, 2023, vol. 226, issue C

Abstract: This study investigates the relationship between board refreshment and director excess compensation, which is often perceived as a sign of dysfunctional board culture. Using a composite board refreshment index (BRI) comprised of seven director refreshment characteristics, I show that board refreshment increases director compensation for undercompensated directors. However, for overcompensated directors, board refreshment has an adverse effect on excess compensation. This association is primarily driven by five out of the seven refreshment characteristics. Overall, these findings suggest that board refreshment may play an important role in aligning director compensation with efficient levels.

Keywords: Board diversity and refreshment; Director compensation; Excess compensation; Board entrenchment (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:226:y:2023:i:c:s0165176523001258

DOI: 10.1016/j.econlet.2023.111100

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