The determinants of board compensation in SOEs. An application to Italian local public utilities

Anna Menozzi, Fabrizio Erbetta, Giovanni Fraquelli and Davide Vannoni

No 231, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper investigates the determinants of board compensation for a sample of Italian State Owned Enterprises (SOEs). To that purpose, we use a newly collected panel data of 106 local public utilities observed form 1994 through 2004, which includes detailed information on the boards of directors. During this period, the deregulation process inspired institutional interventions that forced utilities, traditionally owned by local municipalities, to change their juridical form and ownership structure, thereby facilitating the entrance of private investors. The corporate governance literature shows that such changes may exacerbate the agency conflicts between shareholders, top executives and the board. However, board compensation could reduce the agency costs by aligning the incentives of managers with the interests of shareholders. This paper addresses this issue by investigating the impact that board composition, firm characteristics and performance have on board compensation. We find that the average board pay is negatively related to board size and positively related to firm dimension. The public or private nature of the major shareholder does not influence board compensation but the juridical form does. Finally, while the proportion of politically connected directors is found to negatively influence the level of per capita compensation, the impact of firm performance is uncertain.

Keywords: board compensation; board composition; politicians; local public utilities (search for similar items in EconPapers)
JEL-codes: G34 J33 L97 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2011
New Economics Papers: this item is included in nep-bec and nep-cfn
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Related works:
Journal Article: The determinants of board compensation in SOEs: an application to Italian local public utilities (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:231

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