Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 348

Full Length Research Paper

Effect of corporate governance on the top management team compensation

Higher Institute of Accounting and Business Administration, Manouba, Tunisia. 
Email: [email protected]

  •  Accepted: 20 December 2011
  •  Published: 31 January 2012



This paper has explored the determinants of the top management team (TMT) compensation. Specifically, it has examined the influence of ownership structure and the board of directors’ effectiveness on the TMT compensation in a sample of 274 most admired American firms of fortune magazine. When panel data methodology was applied, the results have shown that TMT pay level has not been affected by the supervisory effectiveness of the board and the ownership concentration. These results have contradicted the classic suppositions of the agency theory and have supported the cognitive approach expectations. Furthermore, the results have indicated that the TMT compensation has been significantly influenced by the size, the performance of firms, the age and the tenure of the top managers. But, the size of the firm has been the most significant factor in determining the level of TMT compensation (managerial hegemony theory). It should be noted that this study has envisaged various components of compensation and different measures of performance to ensure the robustness of the results.


Key words: Top management team (TMT), compensation, corporate governance, performance.


JEL classification: M12, J31, G30, L1.