CEO Compensation, Board of Directors and Corporate Governance in European Companies

Resumen

In this Ph.D. thesis we analyze the composition of the board of directors as key corporate governance mechanism in Europe. In the first chapter we present stylized features of firms¿ corporate governance in the main Western European Economies (the group E-17), comparing economic determinants, governance structures and institutional frameworks among countries, and along the time dimension. We describe the evolution of the European Corporate Sector in the last decade, stressing the importance of the harmonization process that has been going on since the beginning of this century. We also present key academic contributions in the field of corporate governance studies, both worldwide and in Europe. In the second chapter we analyze how the use of committees improves board efficiency and how it contributes to increase firm value. In the third chapter we analyze how European firms use board independence and CEO compensation as alternative corporate governance mechanisms. In our study, we find that firms that combine independent advising committees and independent boards are those with higher firm value. We also find a positive relation between board independence and the use of CEO equity linked compensation. Overall in our study we show that although board independence alone is not statistically related to firm value, the use of independent board of directors combined with additional instruments (such as advising committees and equity linked compensation) is associated with higher firm valuation in Europe.