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Governance strategy and costs: board compensation in Sweden
Linnéuniversitetet, Institutionen för ekonomistyrning och logistik (ELO).ORCID iD: 0000-0001-5098-1618
Linnéuniversitetet, Institutionen för ekonomistyrning och logistik (ELO).ORCID iD: 0000-0002-8009-9949
EY, Sweden.
Swedish Agency for Economic and Regional Growth.
2016 (English)In: Journal of Management and Governance, ISSN 1385-3457, E-ISSN 1572-963X, p. 1-29Article in journal (Refereed) Epub ahead of print
Abstract [en]

Shareholders are not identical, but differ in their objectives and actions. One difference is the level of delegation of the principal functions to the board, which we suggest can be observed through the level of directors’ compensation. We analyze the difference in board compensation through the concept of governance strategy and suggest two distinct categories of shareholder strategies: the company governance strategy and the financial governance strategy. These strategies create different distributions of governance costs, which we separate into principal costs and agency costs. We claim that the financial governance strategy adopts a higher level of delegation, which implies that the principal costs are assumed by the corporation and that agency costs are higher. This in turn can explain the higher compensation for the directors of the board compared to compensation under the company governance strategy. We test our hypothesis using a three-year panel of Swedish listed corporations and find that shareholders pursuing a financial governance strategy are associated with higher levels of board compensation. These findings suggest the existence of differences in governance strategies, reflected in governance costs through board compensation, among different types of shareholders in a corporation.

Place, publisher, year, edition, pages
Springer , 2016. p. 1-29
Keyword [en]
Board of directors, Compensation, Governance cost, Governance strategy, Principal cost, Sweden
National Category
Business Administration
Research subject
Economy, Business administration
Identifiers
URN: urn:nbn:se:uu:diva-314731DOI: 10.1007/s10997-016-9359-zOAI: oai:DiVA.org:uu-314731DiVA: diva2:1071592
Projects
Board Compensation in Sweden
Funder
Torsten Söderbergs stiftelse, E30/12]
Available from: 2016-11-26 Created: 2017-02-06 Last updated: 2017-11-29Bibliographically approved

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Ponomareva, Yuliya

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