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CEO External Directorate Networks and Compensation: Evidence from Taiwanese Family Business Groups
Liu - Ching Tsai,
National Chia - Yi University
Chaur - Shiuh Young, National Cheng Kung University
ABSTRACT. In this study, we examine the role of CEO social capital in determining family vs. nonfamily CEOs’ compensation in a network-based business society and governance system. Using a large sample of panel data of family firms listed on the Taiwan Stock Exchange (TSE) over 2000 to 2002, this study examines the association between a CEO’s social capital, defined as external directorship ties held by the CEO, and his or her compensation after controlling for other potential factors that may affect the level of CEO compensation. The empirical results show that CEO social capital is an important determinant of the CEO’s pay level for nonfamily CEOs. By contrast, family CEOs’ pay provides less reward for his or her individual social capital. The results suggest that to attract, retain, and motivate a nonfamily CEO with desired individual social capital, her pay levels must be associated with her networking efforts.
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