As board remuneration is an expense and its impact on the profit of the same year must be negative. Consequently impact of board remuneration (dependent variable) will be negative on return on equity (ROE) and return on assets (ROA) as well. Would there be situations where board remuneration will positively affect net income/ROE/ROA of the comntemporaneous year?
I deviate from the above statement since as for one many packages (especially within financial services sector), these are variable in nature. This in simple term means that they will not be added in the data set well until the next year or beyond.Secondly one should consider what if scenario at awards which might be deferred to future financial years.
Your analysis fails to consider two important aspects. First, the reason a company has a Board is to garner expert guidance on how to increase return on equity and assets, insure legal compliance, etc. Higher Board remuneration may allow the company to enlist a higher quality Board that does a better job at helping to increase its returns. If so, higher Board pay would result in rising returns. Second, Board compensation can be tied to financial performance, which again means higher compensation as returns rise.
Thanks a lot Mr. Ted R Miller! Your answer is very clear and comprehensive. I have found it helpful!
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