SHAREHOLDER CONCENTRATION, BOARD STRUCTURE AND EXECUTIVE REMUNERATION

FREITAS, MARIA RAFAELA DE OLIVEIRA; PEREIRA, GUSTAVO MAGNO; VASCONCELOS, ALESSANDRA CARVALHO DE; LUCA, MÁRCIA MARTINS MENDES DE

doi:10.1590/S0034-759020200503

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ARTICLES • Rev. adm. empres. 60 (5) • Sep-Oct 2020 • https://doi.org/10.1590/S0034-759020200503 copy

SHAREHOLDER CONCENTRATION, BOARD STRUCTURE AND EXECUTIVE REMUNERATION

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Understanding the dynamics of agency conflicts in Brazilian firms requires investigating the influence of shareholder concentration and board structure in the remuneration level of executives. Based on a sample of 232 firms traded on B3 between 2014 and 2016, we found shareholder concentration to have a negative effect on executive remuneration, as predicted by the agency theory. The characteristics of the board structure also have repercussions on executive compensation. Some of these characteristics affect the sensitivity of compensation to shareholder concentration, which, contrary to the managerial power approach, highlights the predominance of the principal-principal conflict in Brazil.

KEYWORDS
Shareholder concentration; board of directors; executive compensation; agency conflicts; managerial power

Variable	Description
Level of remuneration of executive directors (TREMN)	Natural logarithm (Ln) of the total remuneration of the executive directors (LnTREMN)
Ownership concentration (OWNCON)	Proportion of shares with voting rights belonging to the largest (SVR₁), the two largest (SVR₂), the three largest (SVR₃), the four largest (SVR₄),and the five largest shareholders (SVR₅)
Board size (BDSIZE)	Total number of sitting board members
CEO duality (CEODU)	Dual role as chairman and CEO (dummy variable: scored as 1 in the presence of duality; 0 otherwise)
Insiders (BDEXE)	Proportion of sitting board members who hold executive positions in the firm
Independent BD members (BDIND)	Proportion of independent members on the board
BD members appointed by large shareholders (BDAPP)	Proportion of sitting board members appointed by controlling shareholders
Company size (LnSIZE)	Natural logarithm (Ln) of assets
Leverage (LEV)	Total debts divided by total assets
Corporate performance (PERFM)	Net earnings divided by total assets

Variable	Minimum	Maximum	Mean	Std. Dev.	Variation coefficient
TREMN	8.688,00	93,304,626.83	10,210,300.74	12,708,135.98	1.245
LnTREMN	9.070	18.351	15.404	1.462	0.095
ROA	-8.256	2.218	-0.029	0.454	-15.891
LnSIZE	7.520	20.618	14.574	2.019	0.139
LEV	0.001	12.267	0.727	0.908	1.250
SVR₁	0.034	1.000	0.490	0.259	0.529
SVR₂	0.068	1.000	0.629	0.243	0.387
SVR₃	0.069	1.000	0.695	0.226	0.325
SVR₄	0.069	1.000	0.731	0.214	0.292
SVR₅	0.069	1.000	0.752	0.205	0.273
BDSIZE	1.000	20.000	8.115	3.572	0.440
BDIND	0.000	1.000	0.193	0.210	1.087
BDEXE	0.000	1.000	0.111	0.132	1.183
BDAPP	0.000	1.000	0.705	0.331	0.469

Variable	LnTREMN	BDSIZE	BDIND	BDEXE	BDAPP	LnSIZE	LEV	ROA	SVR1	SVR2	SVR3	SVR4	SVR5
LnTREMN	1.000
BDSIZE	0.441^(**)	1.000
BDIND	0.290^(**)	0.025	1.000
BDEXE	-0.394^(**)	-0.399^(**)	-0.263^(**)	1.000
BDAPP	-0.125^(**)	-0.065	-0.446^(**)	0.110^(**)	1.000
LnSIZE	0.717^(**)	0.597^(**)	0.196^(**)	-0.362^(**)	-0.034	1.000
LEV	-0.228^(**)	-0.143^(**)	-0.093^(*)	0.321^(**)	-0.007	-0.225^(**)	1.000
ROA	0.179^(**)	0.146^(**)	0.048	-0.151^(**)	-0.042	0.230^(**)	-0.491^(**)	1.000
SVR1	-0.259^(**)	-0.055	-0.422^(**)	0.088^(*)	0.356^(**)	-0.132^(**)	0.144^(**)	-0.075^(*)	1.000
SVR2	-0.334^(**)	-0.069	-0.471^(**)	0.117^(**)	0.357^(**)	-0.194^(**)	0.135^(**)	-0.067	0.909^(**)	1.000
SVR3	-0.370^(**)	-0.089^(*)	-0.484^(**)	0.156^(**)	0.338^(**)	-0.224^(**)	0.155^(**)	-0.063	0.826^(**)	0.967^(**)	1.000
SVR4	-0.377^(**)	-0.101^(**)	-0.493^(**)	0.153^(**)	0.331^(**)	-0.234^(**)	0.137^(**)	-0.053	0.750^(**)	0.913^(**)	0.981^(**)	1.000
SVR5	-0.386^(**)	-0.120^(**)	-0.491^(**)	0.159^(**)	0.318^(**)	-0.253^(**)	0.126^(**)	-0.046	0.700^(**)	0.870^(**)	0.952^(**)	0.990^(**)	1.000

Independent variables	(i)		(ii)		(iii)		(iv)		(v)
SVR₁	-0.913	^(***)	-0.674		-0.899	^(***)	-0.800	^(***)	-0.850	^(***)
BDSIZE	0.010
BDIND			0.718	^(***)
BDEXE					-1.581	^(***)
BDAPP							-0.231	^(*)
CEODU									-0.363	^(***)
SVR₁*BDSIZE	-0.181	^(***)
SVR₁*BDIND			-3.299	^(***)
SVR₁*BDEXE					1.802
SVR₁*BDAPP							2.269	^(***)
SVR₁*CEODU									0.513
ROA	-0.067		-0.059		-0.040		-0.077		-0.039
LnSIZE	0.487	^(***)	0.486	^(***)	0.465	^(***)	0.497	^(***)	0.489	^(***)
LEV	-0.097	^(**)	-0.095	^(**)	-0.033		-0.104	^(**)	-0.072
Constant	8.738	^(***)	8.566	^(***)	9.258	^(***)	8.775	^(***)	8.772	^(***)
N	696		696		696		696		696
R²	0.545		0.553		0.561		0.547		0.549
F	165.33		170.85		176.39		166.66		168.59
p-value	0.000		0.000		0.000		0.000		0.000
SVR₂	-1.197	^(***)	-0.973	^(***)	-1.167	^(***)	-1.103	^(***)	-1.121	^(***)
BDSIZE	0.013
BDIND			0.553	^(***)
BDEXE					-1.544	^(***)
BDAPP							-0.166
CEODU									-0.312	^(**)
SVR₂*BDSIZE	-0.080	^(*)
SVR₂*BDIND			-1.973	^(**)
SVR₂*BDEXE					-0.323
SVR₂*BDAPP							1.683	^(***)
SVR₂*CEODU									0.970
ROA	-0.056		-0.052		-0.030		-0.063		-0.032
LnSIZE	0.470	^(***)	0.478	^(***)	0.453	^(***)	0.485	^(***)	0.478	^(***)
LEV	-0.094	^(**)	-0.093	^(**)	-0.033		-0.100	^(**)	-0.073
Constant	9.257	^(***)	8.998	^(***)	9.718	^(***)	9.204	^(***)	9.217	^(***)
N	696		696		696		696		696
R²	0.557		0.561		0.572		0.558		0.560
F	173.86		176.80		184.75		174.22		176.07
p-value	0.000		0.000		0.000		0.000		0.000
SVR₃	-1.404	^(***)	-1.188	^(***)	-1.351	^(***)	-1.314	^(***)	-1.323	^(***)
BDSIZE	0.013
BDIND			0.478	^(**)
BDEXE					-1.470	^(***)
BDAPP							-0.153
CEODU									-0.283	^(**)
SVR₃*BDSIZE	-0.016
SVR₃*BDIND			-1.246
SVR₃*BDEXE					-2.997	^(**)
SVR₃*BDAPP							1.628	^(***)
SVR₃*CEODU									0.114
ROA	-0.038		-0.037		-0.014		-0.046		-0.017
LnSIZE	0.463	^(***)	0.473	^(***)	0.449	^(***)	0.479	^(***)	0.472	^(***)
LEV	-0.082	^(*)	-0.083	^(*)	-0.025		-0.088	^(*)	-0.064
Constant	9.573	^(***)	9.295	^(***)	9.978	^(***)	9.504	^(***)	9.507	^(***)
N	696		696		696		696		696
R²	0.563		0.566		0.577		0.564		0.566
F	178.33		180.40		188.37		178.56		180.08
p-value	0.000		0.000		0.000		0.000		0.000
SVR₄	-1.491	^(***)	-1.268	^(***)	-1.437	^(***)	-1.396	^(***)	-1.408	^(***)
BDSIZE	0.013
BDIND			0.460	^(**)
BDEXE					-1.474	^(***)
BDAPP							-0.158
CEODU									-0.287	^(**)
SVR₄*BDSIZE	0.012
SVR₄*BDIND			-0.862
SVR₄*BDEXE					-3.431	^(**)
SVR₄*BDAPP							1.497	^(***)
SVR₄*CEODU									-0.307
ROA	-0.036		-0.035		-0.012		-0.044		-0.015
LnSIZE	0.461	^(***)	0.471	^(***)	0.446	^(***)	0.476	^(***)	0.470	^(***)
LEV	-0.089	^(*)	-0.089	^(*)	-0.031		-0.094	^(**)	-0.070
Constant	9.724	^(***)	9.433	^(***)	10.134	^(***)	9.656	^(***)	9.660	^(***)
N	696		696		696		696		696
R²	0.564		0.566		0.577		0.564		0.566
F	178.64		180.56		188.81		178.99		180.52
p-value	0.000		0.000		0.000		0.000		0.000
SVR₅	-1.533	^(***)	-1.296	^(***)	-1.477	^(***)	-1.430	^(***)	-1.449	^(***)
BDSIZE	0.011
BDIND			0.478	^(**)
BDEXE					-1.467	^(***)
BDAPP							-0.175
CEODU									-0.297	^(**)
SVR₅*BDSIZE	0.027
SVR₅*BDIND			-0.651
SVR₅*BDEXE					-3.636	^(**)
SVR₅*BDAPP							1.513	^(***)
SVR₅*CEODU									-0.407
ROA	-0.032		-0.032		-0.008		-0.041		-0.010
LnSIZE	0.459	^(***)	0.468	^(***)	0.443	^(***)	0.473	^(***)	0.466	^(***)
LEV	-0.094	^(**)	-0.093	^(**)	-0.036		-0.099	^(**)	-0.074
Constant	9.829	^(***)	9.521	^(***)	10.239	^(***)	9.770	^(***)	9.773	^(***)
N	696		696		696		696		696
R²	0.562		0.565		0.576		0.563		0.565
F	177.63		179.81		187.72		178.25		179.75
p-value	0.000		0.000		0.000		0.000		0.000

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