The Effect of Ownership Structure and Board Characteristics on Excessive Compensation of Top-Level Management

This study explored the impact of ownership structure and board characteristics on executive excessive compensation in Taiwanese-listed companies from 2012 to 2021. Regarding ownership structure, the research findings indicate that managerial ownership, institutional ownership, and ownership deviation from earnings are significantly positively related to executive excessive compensation. This suggests that top managers may be motivated by self-interest to receive excessive compensation, while institutional shareholders tend to provide higher compensation to incentivize top-level management. Moreover, when company ownership is concentrated among a few controlling shareholders, agency problems become more severe, leading to higher executive excessive compensation. Additionally, large shareholders’ and board directors’ ownership percentages showed a significant negative relationship with executive excessive compensation. This indicates that higher ownership percentages by large shareholders and board directors enhance their monitoring effectiveness, restraining excessive compensation for top-level management. Regarding board characteristics, empirical results show that board size, the busyness of independent directors, and the frequency of compensation committee meetings are significantly positively associated with executive excessive compensation. Larger board sizes and the busyness of independent directors reflect poorer corporate governance, enabling top-level executives to obtain higher levels of excessive compensation. In contrast, a higher frequency of compensation committee meetings suggests greater engagement of committee members. This can lead to better operational performance of companies and increased executive excessive compensation.