CEO Compensation, Board Independence and Social Ties: Evidence form Taiwan TSE and GTSM Companies
Date Issued
2012
Date
2012
Author(s)
Chen, Yu-Liang
Abstract
Prior research suggests that independent director’s social ties with the CEO could undermine the efficacy of a formally independent director in the firm. In this study, I examine the relation between social ties and CEO compensation over the time period of 2006 to 2010 using hand-collecting data from Taiwanese TSE and GTSM companies. My results suggest that CEO compensation is higher when social ties exist between CEO and independent directors. In addition, this study also finds that the impacts of social ties are wholly integrated to affect decisions of independent directors rather than individually affecting them. Moreover, CEO of technology industries might have more social connections with their independent board members and they tend to share social relationships with them through social networks because of limitations of professional knowledge. Consequently, CEO of technology industries would receive higher compensation than other industries. Thus, my findings would be useful in better informing regulators and investors faced with questions related to the possible consequences of CEO-board social ties for business decisions and other concerning economic outcomes.
Subjects
social ties
CEO compensation
board independence
independent directors
Type
thesis
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