ISS: Board Leadership Structure Affects Excessive Pay

A new report from ISS finds that “board leadership has a significant impact on CEO pay, with separate
but “insider” chairmen overseeing the highest paid CEOs, followed by the combined chair/CEO role,
then outsider but “affiliated” chairs. CEOs of companies with independent directors serving as board
chair received the lowest pay packages, on average, over the study period. While company revenue
also shows significant association with CEO pay, other potential factors tested — relative performance
(indexed TSR), CEO tenure, and the presence of a new CEO – did not. Based on evidence from this
analysis, it appears that independent board chairs may provide the most effective check to the CEO, at
least in terms of compensation determination.”

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