Determinants of CEO Compensation: Empirical Evidence from Listed Banks of Bangladesh

CEO Compensation has received massive attention in recent years because CEO compensation plays a pivotal role to meet the company’s objectives or shareholders’ goals. Determinants of CEO compensation are examined through firm performance, corporate governance mechanisms (including board composition and ownership structures) and external monitoring parameters. The empirical research conducted on listed banks of Bangladesh during the period from 2006 to 2013. This research finds a positive relationship of CEO pay with firm performance and firm size. CEO pay is higher due to weak corporate governance mechanisms. This study also finds that independent directors, female directors, institutional investors, and directors’ nominees can’t play their monitoring role in setting CEO compensation. The results recommend that the banks should disclose executive information in more details particularly CEO information including performance incentives. Moreover, the regulators or government should more emphasize on efficient corporate governance mechanisms which will reduce the agency cost of the shareholders.