Abstract

The absence or failure of some mechanisms of corporate governance facilitates to board members on the possibility of establishing a reward system more suitable to their own personal interests rather than to those of investors. Nowadays, this problem has intensified the lack of investors confidence in the members of the board of directors, whose payment levels have been criticized, especially over the last few years. In this context, this study aims to verify empirically the relationship between the characteristics of boards of directors and the level and structure of compensation of directors in Spain, in order to analyze its significance in the control of salaries. With a view to testing this hypothesis, we selected a sample of 76 listed Spanish corporations for the period 2004-2009. The results of this work reveal that control mechanisms like the separation of the figures of the chairman and the chief executive officer (CEO), the shareholding of board members, and the percentage of independent directors were found to be significant in reducing the levels of remuneration to the members of the board, specifically, cash payments received by them. Therefore, the characteristics of the board may influence their own remuneration, particularly in an ownership concentration context.

Key words: Directors compensation, board of director, data panel analysis, corporate governance.