I examine the effects of board member departures on CEO compensation using a sample of high growth IPO firms. Agency theory predicts that a reduction in board monitoring by harvester directors (VCs and private equity investors) will result in an increase in CEO pay. I find that departures of the last harvester director on a board result in an immediate and lasting increase in CEO equity compensation, while prior departures by other harvester directors are not significant. The results hold even when controlling for other governance mechanisms such as CEO wealth, CEO turnover, board composition, and external blockholder ownership.
Jarosiewicz, Victor, CEO Compensation after Harvester Director Departure (October 1, 2017). Quarterly Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3042780 or http://dx.doi.org/10.2139/ssrn.3042780