Public thrift, private perks: signaling board independence with executive pay Articles uri icon

publication date

  • April 2021

start page

  • 845

end page

  • 891


  • 2


  • 76

International Standard Serial Number (ISSN)

  • 0022-1082

Electronic International Standard Serial Number (EISSN)

  • 1540-6261


  • We analyze how boards' reputational concerns influence executive compensation and the use of hidden pay. Independent boards reduce disclosed pay to signal their independence, but are more likely than manager-friendly boards to use hidden pay or to distort incentive contracts. Stronger reputational pressures lead to lower disclosed pay, weaker managerial incentives, and higher hidden pay, whereas greater transparency of executive compensation has the opposite effects. Although reputational concerns can induce boards to choose compensation contracts more favorable to shareholders, we show that there is a threshold beyond which stronger reputational concerns harm shareholders. Similarly, excessive pay transparency can harm shareholders


  • Business
  • Economics