The evolution of the Board of Directors in the UK corporate governance context

Alkalbani, Nasser (2017) The evolution of the Board of Directors in the UK corporate governance context. Doctoral thesis, University of East Anglia.

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    Abstract

    This study first provides a descriptive evidence on the evolution of corporate governance in the UK over 2003-2015. This research reveals that the board size of UK boards was somewhat stable over the 2003-2015 but with a noticeable drop during the 2007 financial crisis. Proportion of non-executive independent directors has increased dramatically over the period of 2003-2015. This is in line with the UK corporate governance codes that recommend most board of directors should be non-executive independent directors. Additionally, CEO duality has also seen a dramatic decrease from 21% in 2003 to almost 7% in 2015. This also reflects the UK corporate governance’s approach to separate the roles of chairman and CEO. Another important observation regarding the evolution of UK boards is that women representation on corporate boards sharply increased over the study period, mostly post the publication of the Davies Report (2011).

    Additionally, this research examines whether the presence of female and foreign directors on the remuneration committee has an influence on say-on-pay voting and chief executive officer (CEO) remuneration. Based on panel data from the UK’s FTSE 350 firms between 2003 and 2015, this study finds that the presence of women on the remuneration committee is associated with a reduction in shareholders’ dissent via say-on-pay voting and leads to lower CEO cash in terms of bonus remuneration, but not CEO equity remuneration. Moreover, this research finds that the presence of foreign directors on remuneration committees is associated with more shareholder dissent votes via say-on-pay voting and higher CEO remuneration, including cash, equity and bonus remuneration.

    This study offers theoretical and academic implications and provides empirical evidence that gender and nationality diversity of directors on a remuneration committee plays a significant role in shaping shareholders’ dissent via say-on-pay voting and CEO pay. The results also provide empirical support for previous studies which find that women are more effective monitors (Adams and Ferreira, 2009; Carter et al., 2003). Additionally, this research provides empirical support for previous studies that find that foreign directors are less effective monitors and lead to higher CEO pay (Masulis et al., 2012).

    Furthermore, this study provides practitioner and policy implications. First, the findings of this research contribute to the on-going debate regarding board diversity, say-on-pay voting and CEO pay literature. Specifically, this study has practical implications, in that recent recommendations for more women on boards, such as those of the Davies Reports, have been useful and effective. This study also supports recent recommendations by the Hampton-Alexander Review (2016) for more representation of women on board sub-committees, such as the remuneration committee. Finally, the results of this research suggest that caution is needed when proposing an increase in foreign directors on board sub-committees, as their insufficient oversight can significantly exacerbate agency conflicts, rather than resolve them, potentially leading to higher CEO pay and a consequent increase in shareholders’ dissent on remuneration policy via the say-on-pay.

    Item Type: Thesis (Doctoral)
    Faculty \ School: Faculty of Social Sciences > Norwich Business School
    Depositing User: Jackie Webb
    Date Deposited: 21 May 2018 10:26
    Last Modified: 21 May 2018 10:26
    URI: https://ueaeprints.uea.ac.uk/id/eprint/67137
    DOI:

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