Compensating Outside Directors with Stock: The Impact on Non-Primary Stakeholders

Yuval Deutsch () and Mike Valente ()

Journal of Business Ethics, 2013, vol. 116, issue 1, 67-85

Abstract: Two obvious trends in corporate governance include broadening board accountability beyond shareholders’ interests and paying outside directors with equity compensation (stock and stock options). By integrating common agency and instrumental stakeholder theories, we examine the effect of stock compensation on secondary stakeholders and a firm’s participation in social issues, two areas where interests are less aligned with shareholder value. Consistent with our predictions, we found that while stock compensation may be an effective way to align directors’ goals to those of shareholders, it has adverse effects on important non-shareholder constituencies in the company’s operating environment. Copyright Springer Science+Business Media B.V. 2013

Keywords: Common agency theory; Corporate social responsibility; Outside director stock compensation; Stakeholder theory (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10551-012-1447-7

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