The cost of CEO duality: Evidence from French leadership compensation

Géraldine Broye (), Abel François and Yves Moulin ()
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Yves Moulin: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: This paper aims to provide a detailed analysis of the relationship between board leadership structures and executive compensation. According to agency theory, the combined position of CEO and Chairperson of the Board (COB) entails greater compensation for the CEO in order to reduce conflicts of interest. In the literature, combined board structure is generally considered to generate additional costs for companies. However, the choice of two separate structures implies the payment of incentive compensation for the COB in addition to that defined for the CEO. This paper investigates the financial cost of duality when compensation packages are set for both leaders. Our results suggest that although combined board structure is associated with higher incentive compensation for the CEO, the overall compensation cost to the company is no higher when the chairperson's compensation is considered.

Keywords: Corporate governance; Executive compensation; Duality; Chairperson of the board; France (search for similar items in EconPapers)
Date: 2017-06
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Citations: View citations in EconPapers (5)

Published in European Management Journal, 2017, 35 (3), pp.336 - 350. ⟨10.1016/j.emj.2017.01.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01744545

DOI: 10.1016/j.emj.2017.01.007

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