CEO Compensation, Backdated Stock Options, and Compensation Committees

CEO compensation in U. S. based companies has undergone considerable scrutiny in recent years. Among the common observations are that U. S. executives are highly paid relative to those of other countries and that the disparities in compensations are increasing over time. In this study, we investigate the effects that backdated stock options, compensation committee structure and process, and ownership factors have on levels or executive compensation. Combining agency and organizational theory perspectives, we find CEO compensation positively associated with the presence of backdated stock options, few large-block stockholders, and small compensation committees

The Nominating Committee As An Antecedent of Effective Corporate Governance

In this paper, we examine a possible antecedent to board effectiveness – the presence of a nominating committee. We argue that director cooptation by CEOs, and therefore ineffectual governance, may result from allowing CEOs to appoint sympathetic directors. Thus, because outside independent board members are more likely to be effective in their roles as monitors of the CEO, and because such members are more likely to have been selected by nominating committees, measures of board effectiveness should be positively associated with the presence of a nominating committee. Our results are largely consistent with our hypotheses, and are thus instructive in the design of optimal governance mechanisms. We find that firm profitability, frequency of compensation committee meetings, compensation committee size, and CEO experience of compensation committee members are all higher among firms with nominating committees

An Empirical Test of Stewardship Theory

This study tests the model of Davis, Schoorman, and Donaldson (1997) that proposed determinants of a company’s governance structure. In particular, we focus on the stewardship theory aspects of the model and its ability to predict the presence of a stewardship-orientation CEO at publicly listed U.S. companies. Using survey based data obtained from CEOs and directors of 100 companies in a match-pair design, we identified three variables that predicted the occurrence of stewardship-oriented behaviors by the company’s CEO. These results lend support for the model’s ability to predict the conditions under which stewardship-oriented individuals become CEOs

Emotional Intelligence: Comparative Analysis of Accounting and Non-Accounting Business Majors at Two Universities

Success in accounting has long been associated with completing technical tasks as opposed to cultivating relationships. In 1999, the AICPA Core Competency Framework was adopted and expanded professional competencies to include not only functional competencies but personal and broad-based business competencies. Personal competencies include intrapersonal and interpersonal skills, comprising a range of behaviors collectively grouped as emotional intelligence. This study examines the emotional intelligence (“EI”) of 609 business school students at 2 different universities (University A and B), using TTI’s Emotional Quotient (TTI) inventory report. The groups were segregated into accounting and non-accounting groups and comparative t-tests were conducted.  The results were significant, confirming our hypotheses that the EI of accounting students at universities A and B, separately and combined, were lower than the EI scores of non-accounting business majors

Cooperative and Instrumental Stakeholder Networks: A Case Analysis of Two Urban Neighborhoods

Drawing on scholarship from resource dependency, social network analysis, trust, and institutional theories, we present a model that describes the factors that shape relationships among organizations and their stakeholders. We propose that networks comprised by companies and their stakeholders can be primarily cooperative or opportunistic in character. The qualities of the organizations in the network as well as the relationships and structure of those relationships determin whether or not the resulting network can be characterized as cooperative or opportunistic. We illustrate the model by comparing and contrasting the stakeholder networks of two neighborhood development projects

Does Feedback Increase Students' Emotional Intelligence?

This study investigates the extent to which emotional intelligence can be successfully developed through a semester-long classroom intervention and self-directed learning process among students in a college of business administration. We found that with emotional intelligence training, all students experienced improvement between the administrations of pre-tests and post-tests. This result also held regardless of maturity level (undergraduate or graduate student), or gender

CEO Compensation, Backdated Stock Options, and Compensation Committees

CEO compensation in U. S. based companies has undergone considerable scrutiny in recent years. Among the common observations are that U. S. executives are highly paid relative to those of other countries and that the disparities in compensations are increasing over time. In this study, we investigate the effects that backdated stock options, compensation committee structure and process, and ownership factors have on levels or executive compensation. Combining agency and organizational theory perspectives, we find CEO compensation positively associated with the presence of backdated stock options, few large-block stockholders, and small compensation committees

The Nominating Committee As an Antecedent of Effective Corporate Governance

In this paper, we examine a possible antecedent to board effectiveness – the presence of a nominating committee. We argue that director cooptation by CEOs, and therefore ineffectual governance, may result from allowing CEOs to appoint sympathetic directors. Thus, because outside independent board members are more likely to be effective in their roles as monitors of the CEO, and because such members are more likely to have been selected by nominating committees, measures of board effectiveness should be positively associated with the presence of a nominating committee. Our results are largely consistent with our hypotheses, and are thus instructive in the design of optimal governance mechanisms. We find that firm profitability, frequency of compensation committee meetings, compensation committee size, and CEO experience of compensation committee members are all higher among firms with nominating committees

Backdated Stock Options and Boards of Directors: An Examination of Committees, Structure, and Process

Manuscript Type: Empirical Research Question/Issue: In this study, we investigated the effects of several factors related to nominating and compensation committee structure and process on the likelihood of employing backdated stock options. Research Findings/Insights: To test our hypotheses, we selected a sample of US firms that had been investigated for backdating stock options and a control group of similar sized US firms from the same industry that had not been investigated for backdating. Using an agency perspective, we found that when compared to companies within the same industries, firms using backdated stock options did not tend to utilize nominating committees, and structured their compensation committees so that they are smaller, and meet less frequently. We also found that their CEOs are more generously compensated. Consistent with agency theory, these findings indicate that companies using backdated stock option may possess compromised monitoring and incentive alignment mechanisms. Theoretical/Academic Implications: Despite being one of the most dominant management theories in recent history, little empirical evidence supports the validity of agency theory. In contrast to studies producing results calling into question the value of agency theory, we found significant results with regard to understanding the conditions under which agency problems might be promulgated. Also, our study contributes to the understanding of corporate governance by examining a variety of possible antecedents to the practice of backdated stock options and how boards and committees may be constructed to more effectively reduce the agency problem. Practitioner/Policy Implications: Our results provide important evidence concerning factors or situations associated with backdating, which will be instructive in designing remedies to curb such practices in the future. In particular, to reduce the likelihood of dating schemes such as backdated stock options, firms should consider utilizing nominating committees, and constructing committees with more members and requiring frequent meetings so that directors can be better positioned for the effective execution of their monitoring responsibilities of management