 Should I stay or should I go? Former CEOs as monitorsChristian Andres, Erik Fernau and Erik Theissen Journal of Corporate Finance, 2014, vol. 28, issue C, 26-47 Abstract: In the German two-tiered system of corporate governance, it is not uncommon for chief executive officers (CEOs) to become the chairman of the supervisory board of the same firm upon retirement. This practice has been the subject of controversial debate because of potential conflicts of interest. As a member of the supervisory board, the former CEO must monitor his successor and former colleagues and is involved in setting their pay. We analyze a panel covering 150 listed firms over a 10-year period. Consistent with a leniency bias, we find evidence that firms in which a former CEO serves on the supervisory board pay their executives more. We further find weak evidence that the compensation of the members of the supervisory board is also higher. Short-run event study results indicate that the announcement of the transition of a retiring CEO to the supervisory board is considered good news. Thus, despite the increases in executive compensation we document, CEO transitions are not a cause of concern for shareholders. Keywords: Executive compensation; Board structure; Two-tiered board (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:28:y:2014:i:c:p:26-47 DOI: 10.1016/j.jcorpfin.2013.12.008 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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