On the compensation and activity of corporate boards

- Examine the association between director compensation and director activity
- Firms use meeting fees and equity-based compensation as substitutes.
- Meetings fees are associated with more active boards and committees.
- Equity-based compensation increases monitoring activity but not advising activity.
- More active boards and committees are paid more.

Within the nexus of contracts that makes up the firm, relatively little is known about the relationship between firms and their directors. Using a unique dataset comprising director compensation and activity, I find that firms use meeting fees and equity-based compensation as substitutes. In addition, paying directors for attending board/committee meetings is associated with more active boards and more active monitoring and advising committees. In contrast, a higher proportion of equity-based compensation is positively associated with monitoring activity but negatively associated with advising activity. Furthermore, more active boards and committees are paid more. Finally, I find that the variation in director compensation and activity generally reflects trade-offs between the costs and benefits of director effort, consistent with prior work.