Abstract

This study investigates variables that influence director compensation of listed Taiwanese companies using the new disclosure rule for director compensation. We divided the compensation from its structure into three types: non-incentive compensation, incentive compensation, and total compensation. This study collected the research samples of companies listed in Taiwan Stock Exchange from 2005 until 2007. Using multiple regression analysis, we investigated the variables, which influenced the director compensation. Our results show that the amount of director compensation is influenced by the relative performance of the industry. These companies considered performance level of competitors or the whole industry. The monitoring effect of inside directors can reduce agency conflicts. The company will lower the levels of director compensation to avoid the inefficiency of its directors. It should also be noted that the outside monitoring effect and director compensation are complementary to each other in governing the company and the board of directors. If the active institutional investors of a company have a high percentage of ownership, the levels of director compensation would be relatively high. When the company has a high level of future growth, then the shareholders will encourage directors to monitor the company vigorously and contribute to future developments of the company by an increased director compensation.  

Keywords

secondary agency cost director compensation agency conflict