Does board interlock increase ceo compensation?: evidence from Brazilian listed companies

Abstract

This study investigates the effects of board interlocking on CEO compensation, the impact of gender diversity on boards on CEO compensation, and whether gender diversity mitigates board interlocking effects on CEO compensation. Our sample contains 275 Brazilian companies listed on the Brazilian Stock Exchange (B3), covering 2011 to 2018. This sample made it possible to evaluate Brazilian companies’ corporate governance framework and evaluate the Brazilian market’s peculiarities, such as many economic groups organization. The empirical findings of our study threefold. First, our results indicate that the higher is the level of board interlocking, the higher is CEO compensation in the Brazilian companies covered by our study. Second, the percentage of women on boards negatively affects CEO compensation. Third, by analyzing the moderating role of gender diversity, our results show that gender diversity reduces the effect of board interlocking on CEO compensation. Overall, our study supports the agency and managerial power theory perspectives, as per the board of directors’ role in setting CEO compensation package, and the issues that can influence this role.