Media Supervision, Board Structure And Senior Executive Compensation

With the development and improvement of internal corporate governance theory, more and more scholars turn their attention to the company’s external supervision mechanism. The media, as an economic player who cannot be ignored, has become the representative of governance institutions of external supervision. In reality, the public media, as an important way from which the public get information, to passed the dynamic message of the public listed companies. For the function of supervision and governance of the media, there are firm supporters, of those who have doubts. Both from the theoretical and empirical research studies, there have not been a consistent unified conclusion. So has the media supervision played a role on the listed company, and then can the supervision by the media eventually convert to the governance function of the company? Will the internal governance mechanisms play better because of the external supervision mechanisms? This paper attempts to answer such questions.This paper investigates the relationship between media coverage, board structure and senior executive compensation. First, this paper summarized the previous studies, which describes the motivation of media supervision of listed companies, how the media supervision work and the practical effect of the media supervision mechanisms. Then we add the board structure, one of the internal governance mechanisms, to our study to find out the change of the executives’ salary with the external media supervision and the internal board of directors of listed companies. In this paper, we take the data of some listed companies from 2009 to 2012 as samples. Empirical evidence shows that, in China, senior executive compensation is much higher for firms with greater media coverage, while senior executive compensation is negatively associated with negative reports about firm. For the mechanism of board, senior executive compensation is much higher for firms with larger board size and firms with CEO duality. Also senior executive compensation is negatively associated with the board independence. To some extent, media coverage facilitates the mechanism of board. From the above we can see that media coverage works effectively on corporate governance.