Supervisory Board Committee Overlap and Managers’ Bonus Payments — Empirical Evidence from Germany

Abstract

Using a sample of large publicly listed German firms, we study the effect of compensation and audit committee overlap on top management bonus payments. We find a significant positive impact of overlap on the level and relative importance of bonus payments. Furthermore, we provide evidence that overlap is positively associated with pay-performance sensitivity and find that pay-performance sensitivity is stable over time when overlap is high. Our findings suggest that overlapping members use their prominent position in the interest of the firm. Therefore, board representatives should be selected in a way that favors overlapping committee membership.

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Correspondence to Julia Grathwohl.

Additional information

The authors thank the editor and two anonymous referees, Dirk Black (discussant at the AAA Annual Meeting), Michael Ebert, Raffi Indjejikian, Dirk Simons, Dennis Voeller, and Mikko Zerni (discussant at the EAA Annual Meeting), and participants of the 2012 AAA Annual Meeting in Washington D.C., U.S.A., the 2012 EAA Annual Meeting in Ljubljana, Slovenia, and workshop participants at the University of Mannheim for helpful suggestions on prior versions of this paper. The authors gratefully acknowledge the financial support of the Julius-Paul-Stiegler Foundation.

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Grathwohl, J., Feicha, D. Supervisory Board Committee Overlap and Managers’ Bonus Payments — Empirical Evidence from Germany. Schmalenbach Bus Rev 66, 470–501 (2014). https://doi.org/10.1007/BF03396915

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JEL Classification

  • M12
  • M42

Keywords

  • Audit Committee
  • Bonus Payments
  • Committee Overlap
  • Compensation Committee
  • Overlap Determinants