CONTROL OF DIRECTORS' COMPENSATION IN SPANISH COMPANIES: CORPORATE GOVERNANCE AND FIRM PERFORMANCE

Purpose - The purpose of this chapter is to examine the hypothesized effects of board characteristics and performance on directors' compensation in the Spanish corporations, whose corporate governance is a special example of a unitary board system. Methodology/approach - In order to test the influence of a set of factors on directors' compensation levels, we have developed several models based on linear panel data regression. The sample included 76 listed companies on the Spanish computerized trading system or Continuous Market for the period 2004-2009. Findings - The control mechanisms, like board characteristics and performance and their effect on the level of directors' compensation, depend on the types of director (executive, independent and proprietary). Research limitations/implications (if applicable) - This study has certain limitations mainly related to problems associated with obtaining information. The methodology should be complemented by other types of analyses, such as the influence of the characteristics of the board on the remuneration structure in a greater level of disaggregation. Practical implications (if applicable) - The results of this research chapter give reasons to regulators and investors to be aware of the importance of the board's characteristics as corporate control mechanisms over the directors' remuneration and the necessity of connection between directors' compensation and the firm's performance. Originality/value of paper - Firstly, descriptive empirical evidence on the level of directors' compensation is provided within a unitary board system for different types of directors. Secondly, an ample panel data set enables the examination of a set of determinants using panel data methods which control for unobserved firm heterogeneity. Finally, the perspective is extended from executive director compensation to other types of directors, such as proprietary or independent, which are very important features of the Spanish board structure.