Director compensation and firm value: A research synthesis
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Director compensation must be high enough to attract high-caliber individuals and to reward them for their responsibilities, but not so high as to potentially impair their objectivity, judgment and independence.
Director compensation must be set in a transparent and objective way, with clear benchmarks that reflect the most plausible talent markets.
A significant proportion of director compensation must be ‘locked in’ for the long term (5–10 years).
Director compensation must not be based upon the attainment of short-term objectives or goals, but rather based on the long-term success of the organisation predominantly while not encouraging excessive risk taking.
Keywordsboard of directors’ compensation governance literature review incentive plans stock options
We thank the Institute for the Governance of Public and Private Organizations (HEC-Concordia) for its financial support.
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