Publications
Publications
- 2010
- HBS Working Paper Series
Corporate Governance When Founders Are Directors
By: Feng Li and Suraj Srinivasan
Abstract
We examine CEO compensation, CEO retention policies, and M&A decisions in firms where founders serve as a director with a non-founder CEO (founder-director firms). We find that founder-director firms offer a different mix of incentives to their CEOs than other firms. Pay for performance sensitivity for non-founder CEOs in founder-director firms is higher and the level of pay is lower than that of other CEOs. CEO turnover sensitivity to firm performance is also significantly higher in founder-director firms compared to non-founder firms. Overall, the evidence suggests that boards with founder-directors provide more high powered incentives in the form of pay and retention policies than the average U.S. board. Stock returns around M&A announcements and board attendance are also higher in founder-director firms compared to non-founder firms.
Keywords
Business Startups; Governing and Advisory Boards; Executive Compensation; Retention; Managerial Roles; United States
Citation
Li, Feng, and Suraj Srinivasan. "Corporate Governance When Founders Are Directors." Harvard Business School Working Paper, No. 11-018, August 2010.