Board of Directors Compensation and Company Performance in Russia

Recently, the topic of board of directors’ remuneration was widely discussed in the news and articles, pointing that companies have been looking for an optimal solution for a long period of time. Several theories described the corporate governance issues with the respect to remuneration strategies, for instance agency theory, tournament theory, and to some extent stakeholders theory. While some literature assumes that paying higher variable compensation to board of directors will definitely increase the firm performance, other articles suggest the idea that compensation and success are not interrelated or even negatively linked. In addition, some authors suggest the approach that the performance influence compensation, not vice versa. This topic was rather poorly studied in Russia and authors came to controversial conclusions. Therefore, this paper aims at analyzing how compensation of board of directors is connected to company performance in Russia. It also investigates the differences in these interrelations between such sectors of economy as private and state and compares heavy sectors with influenced by human factor ones. In order to answer research questions, the regression analysis is applied to the sample of 70 Russian companies, observed for last 5 years. The results suggest that there is no significant interrelation between compensation and performance overall. Nevertheless, there is negative interconnection in private companies and in companies where intangible assets play essential role. The proposal consists of firstly Introduction, Literature review, discussing main theories of corporate governance and results of previous researches. In Methodology section data collection and processing are presented as well as methods limitations. The Results part describes the outcomes of regression analysis and compares them with previous researches; whereas in the Conclusion the overall summary, practical implications and limitations are discussed.