Document Type

Article

Publication Date

11-2006

Journal or Book Title

Journal of Pension Economics and Finance

Volume

5

Issue

3

First Page

1

Last Page

20

DOI

10.1017/S1474747206002472

Abstract

The independence of outside directors is critical to corporate board effectiveness. We examine a unique period in corporate governance when outside directors' defined benefit pensions are replaced with increases in equity. Firms with pension plans significantly underperform their industry in terms of stock returns. Firms terminating the pension plans in exchange for equity have significant increases in stock returns relative to their industry subsequent to the change. All samples outperform the ROA and ROE industry medians both before and after the change in compensation, indicating pressure from organized investors likely comes from stock performance, not accounting performance. Investor rights pressure and outside director compensation and not takeover risk or institutional ownership best explain firms altering outside director compensation, with board of director effectiveness improving.

Comments

This article is from Journal of Pension Economics and Finance, 5, no. 2 (2006): 155–174, doi:10.1017/S1474747206002472.

Copyright Owner

Cambridge University Press

Language

en

File Format

application/pdf

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