Social elites on the board and executive pay in developing countries: Evidence from Africa

This study applies a new multi-focal actor-centered institution-theoretic approach to examine the association between executive pay and the recruitment of social elites to the board of directors in developing countries. We use a sample of 119 initial public offerings (IPOs) from 17 African stock markets to model this relationship. The results suggest that a higher proportion of elites on the board is associated with lower executive pay. This is moderated by institutional quality; that is, lower institutional quality is associated with more directors drawn from social elites and with higher pay, while the opposite is true in higher-institutional-quality environments. Our findings confirm the importance of the social environment within which governance is embedded.