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Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices *

Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices * Contemporary Accounting Research Vol. 25 No. 4 (Winter 2008) pp. 1147–82 © CAAA doi:10.1506/car.25.4.8 Contemporary Accounting Research To make effective disclosure decisions, boards and compensation committees need to devote a significant amount of time and resources (i.e., personnel and their knowledge base) to set compensation disclosure policies, examine potential disclosure items, consider the consequences of several disclosure options, and make the final decisions. I posit that the time and resource commitment of directors to perform these tasks is positively associated with the extent of compensation practice disclosure. I use three proxies to measure the time and resource commitment of boards: the proportion of busy outside directors (measured by number of directorships), meeting frequency, and board (compensation committee) size. The first two are measures for time commitment of directors and board diligence. Board (committee) size is a proxy for knowledge base and ability to distribute workload and assignments. Boards of directors also need the power to act independently from management to serve the best interests of shareholders. The present study examines board disclosure decisions where shareholders and managers may have conflicts of interests. Although shareholders demanding greater disclosure on executive compensation practices show enthusiasm for the compensation committee report, http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Contemporary Accounting Research Wiley

Corporate Board Governance and Voluntary Disclosure of Executive Compensation Practices *

Laksmana, Indrarini
Contemporary Accounting Research , Volume 25 (4) – Dec 1, 2008
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References (55)

Publisher
Wiley
Copyright
2008 Canadian Academic Accounting Association
ISSN
0823-9150
eISSN
1911-3846
DOI
10.1506/car.25.4.8
Publisher site
See Article on Publisher Site

Abstract

Contemporary Accounting Research Vol. 25 No. 4 (Winter 2008) pp. 1147–82 © CAAA doi:10.1506/car.25.4.8 Contemporary Accounting Research To make effective disclosure decisions, boards and compensation committees need to devote a significant amount of time and resources (i.e., personnel and their knowledge base) to set compensation disclosure policies, examine potential disclosure items, consider the consequences of several disclosure options, and make the final decisions. I posit that the time and resource commitment of directors to perform these tasks is positively associated with the extent of compensation practice disclosure. I use three proxies to measure the time and resource commitment of boards: the proportion of busy outside directors (measured by number of directorships), meeting frequency, and board (compensation committee) size. The first two are measures for time commitment of directors and board diligence. Board (committee) size is a proxy for knowledge base and ability to distribute workload and assignments. Boards of directors also need the power to act independently from management to serve the best interests of shareholders. The present study examines board disclosure decisions where shareholders and managers may have conflicts of interests. Although shareholders demanding greater disclosure on executive compensation practices show enthusiasm for the compensation committee report,

Journal

Contemporary Accounting Research – Wiley

Published: Dec 1, 2008

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