The determinants of board compensation in SOEs: an application to Italian local public utilities

摘要

This article investigates the determinants of board compensation for asample of Italian state owned enterprises (SOEs). To that purpose, we usenewly collected panel data of 106 local public utilities observed from 1994through 2004, which includes detailed information on the boards of directors.During this period, the deregulation process inspired institutional interventionsthat forced utilities, traditionally owned by local municipalities, tochange their juridical form and ownership structure, thereby facilitating theentrance of private investors. The corporate governance literature shows thatsuch changes may exacerbate the agency conflicts between shareholders, topexecutives and the board. However, board compensation could reduce theagency costs by aligning the incentives of managers with the interests ofshareholders. This article addresses this issue by investigating the impactthat board composition,firm characteristics and performance have on boardcompensation. Wefind that the average board pay is positively related tofirm dimension and negatively related to board size. The public or privatenature of the major shareholder does not influence board compensation butthe juridical form does. Finally, while the proportion of politically connecteddirectors is found to negatively influence the level of per capita compensation,the impact offirm performance is uncertain.