Directors of corporations

This study examines the association between corporate social responsibility (CSR) and director compensation arrangements. I develop two competing hypotheses— based on the optimal contracting and rent extraction frameworks—arguing that CSR could shape director reputation or bargaining power, and consequently director pay structure. I further propose that monitoring or advising needs of the company as well as diversity of the board could moderate the proposed association. Finally, I argue that CSR-induced director compensation changes could have implications for firm performance. I document a positive and significant effect of CSR initiatives on director compensation. I also show that the effect is stronger for boards with greater advising but not monitoring needs. Boardroom gender diversity somewhat diminishes the effect of CSR. Finally, CSR-induced director compensation has mixed implications for firm performance. Overall, my results are more consistent with the rent extraction view of director pay arrangements.

This was prepared as the thesis required for the Master of
Business Administration degree. Very little has been written
on Board of Directors-chief paid executive relationships in
voluntary membership organizations. A direct mail questionnaire
was used with selected groups of national association
executives and telephone cooperative managers to ascertain
organization structure, formality of organizational tools,
personal characteristics of the executive and Board, and the
executive's perception of his working environment. Annual
percentage salary increase was used as the distinguishing
criteria. Secondary research concentrated on common practice
and theory regarding the above elements of organization. The
formality of organizational tools, the chief executive's attitude
toward his employees and his position, and the executive's
perception of his job and of his image were found to significantly
affect the Board-Manager relationship in both types of organizations studied. National associations and telephone
cooperatives were affected differently by the other
organizational characteristics studied.

I investigate the association between independent directors' monitoring roles as distinguished by whether they reside on the audit committee (ACs) or not (NACs) and their respective ownership and whether Section 301 or a proxy for alternative independent monitoring (the percentage of institutional ownership) affects this relation. Specifically, I examine whether the objectivity required of serving as an AC (consistent with their audit function role) or alignment with investors (consistent with agency theory) dominates in determining independent directors' level of share ownership. Using generalized estimations of equations I provide evidence that ACs hold less ownership than NACs that suggests differences with respect to independence in appearance/ alignment with shareholder interests not previously documented amongst independent directors. I also find evidence that Section 301 may contribute to this differential ownership while the presence of institutional ownership moderates this relationship.