How do family ties, boards and regulation affect pay at the top?
Author InfoSonja Fagernäs Abstract This paper investigates the effects of corporate governance factors and family ties on the pay of managing directors in a sample of Indian stock listed companies. It uses a unique seven-year firm level panel dataset and controls for firm performance and both CEO and firm specific fixed effects. The hypothesis is that corporate governance, ownership structures and market pressure shape the power relations between the board and managers, and affect the level and structure of CEO pay. The evidence for India supports these hypotheses. Managing directors, who are related to the founding family, or controlling group, or any of the members on the board of directors, are paid more. This holds for total pay and both for the less variable component and the performance-related component of pay. In contrast, the presence of outside representatives on the board – non-executive directors or nominees of creditors or institutional investors – is found to have a disci
