Abstract:
This paper attempts to detect the determinants of board and CEO compensation as well as the different components of the board compensation in the context of an emerging economy, India, where managerial market is yet to be developed. I use panel data of the Indian manufacturing sector to explore two broad issues on determination of board and CEO compensation. First what is the effect of corporate governance and firm performance on board compensation? I have found, board structure, firm performance and diversification have significant effect on total as well as different component of compensation. Second, how different personal attributes of the CEO along with other determinants influence the personal compensation of the CEO? I have found in-firm experiences of the CEO and the relation with founder of the firm or group are the most important determinant of their compensation, which is very different from the findings in US and other developed countries. Further, this study reveals the important factors that determine the probability of the compensation of the CEO to cross the threshold level of compensation in India? All other findings are similar to the previous findings.
