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Publications
Publications
  • November 2011
  • Article
  • Journal of Financial Economics

Corporate Governance When Founders Are Directors

By: Feng Li and Suraj Srinivasan
  • Format:Print
  • | Pages:16
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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

Corporate Governance; Executive Compensation; Retention; Policy; Motivation and Incentives; Performance; Governing and Advisory Boards; Mergers and Acquisitions; Wages; United States

Citation

Li, Feng, and Suraj Srinivasan. "Corporate Governance When Founders Are Directors." Journal of Financial Economics 102, no. 2 (November 2011): 454–469.
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About The Author

Suraj Srinivasan

Accounting and Management
→More Publications

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More from the Authors
  • Creating and Measuring Purpose at Viega By: Ethan Rouen, Suraj Srinivasan and James Barnett
  • Burning Glass Technologies: From Data to Product By: Suraj Srinivasan and Amy Klopfenstein
  • Do You Know How Your Teams Get Work Done? By: Rohan Narayana Murty, Rajath B. Das, Scott Duke Kominers, Arjun Narayan, Suraj Srinivasan, Tarun Khanna and Kartik Hosanagar
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