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臺大管理論叢
第
27
卷第
1
期
377
A higher
FREE_TOBIN
suggests higher agency conflict.
4.2.2 Measure of Committee Overlapping (
OVERLAP_AUCOMP
)
We identify board members who serve on both the compensation committee and the
audit committee from the GMI Ratings database. The number of overlapping audit and
compensation committee members is divided by the number of compensation committee
members. Therefore, the variable measures the overlapping members’ influence on the
compensation decision. The equation is given below:
(3)
4.2.3 Measure of Members Who Are Also Top Executives of Other Company
(
OTHER_EXE
)
We identify whether audit committee members in a firm serve as top executives in other
firms by investigating whether the member is also listed as a top-paid executive in the
ExecuComp database. We then divide the number of audit committee members also listed as
a top-paid executive by the total number of audit committee members. The equation is
presented below:
(4)
4.2.4 Control Variables
Corporate governance has been shown to affect the compensation decisions of outside
directors, mostly audit committee members (Fich and Shivdasani, 2005). To better control
for the effect of a firm’s governance on audit committee members’ compensation, we include
both internal governance (
INGOV
) and external governance (
EXGOV
) proxies in the
regression model.
We use two dummy variables to construct a firm’s internal corporate governance
measure: CEO chair dummy and CEO ownership dummy, explained below:
CEO chair dummy
: A dummy variable that equals 1 if the CEO is not the board chair
and 0 otherwise. Therefore, a larger
CEO chair dummy
means better corporate governance.
CEO ownership dummy
: A dummy variable that takes the value of 1 if the CEO
ownership is larger than the median across CEOs in the sample for the year and 0 otherwise.