Organizational governance and TMT pay level adjustment

This paper analyzes how the characteristics of boards and structure of ownership moderate a firmʹs capacity to adjust top management team (TMT) pay levels in the face of changes in its economic and complexity conditions. Using panel data from Spanish listed companies between 2003 and 2007, the results indicate that, over time, characteristics of corporate governance system contribute to give a fundamental importance to boards and ownership structure in the determination and adjustment of TMT pay. These associations appear to be even stronger than those that in other Western European and North American countries. Both the Spanish cross-holding and concentrated firmsʹ ownership structure, and socially intervened boards play a major role in the high levels of pay received by the TMT, which, in turn, reflect a moderate adjustment of compensation practices to variations of surrounded environment factors.