Determinants of CEO Compensation: Empirical Evidence from Listed Banks of Bangladesh
Keywords:
Agency cost, CEO compensation, corporate governance, external monitoring.Abstract
CEO Compensation has received massive attention in recent years
because CEO compensation plays a pivotal role to meet the company’s objectives
or shareholders’ goals. Determinants of CEO compensation are examined through
firm performance, corporate governance mechanisms (including board composition
and ownership structures) and external monitoring parameters. The empirical
research conducted on listed banks of Bangladesh during the period from 2006 to
2013. This research finds a positive relationship of CEO pay with firm performance
and firm size. CEO pay is higher due to weak corporate governance mechanisms.
This study also finds that independent directors, female directors, institutional
investors, and directors’ nominees can’t play their monitoring role in setting CEO
compensation. The results recommend that the banks should disclose executive
information in more details particularly CEO information including performance
incentives. Moreover, the regulators or government should more emphasize on
efficient corporate governance mechanisms which will reduce the agency cost of the
shareholders.
