The effect of voluntary disclosure and transparency on directors ́ remuneration control

الملخص EN

The economic and financial crisis experienced by the world economy, during the years 2008-2012, has again highlighted the weaknesses of the capitalist system and the need to impose limitations on certain agents which have a significant influence on the future of business and the economy in general. In this sense, the remuneration excesses committed by some Boards of Directors, especially in the financial sector, have shown the importance of agency problems once again.

In these years, it was not uncommon to find cases in which Egyptian companies had awarded millions in compensation, salaries or bonuses to their executives and directors, while ultimately they ended up being rescued by governmental authorities.

This and other situations of a similar nature have weakened the mood of Egyptian society, especially when some firms that had been committing abuses were funded by the Egyptian government, while population had to make sacrifices to overcome the crisis.

Therefore, the configuration of the compensation of the directors has received increasing attention in recent times. Under these situations, the recommendations taken at national level have focused on increasing the information transparency on compensation practices, in specially, about the detailed remuneration policy and individual remuneration granted to the members of Board of Directors. The importance of this study is due to that there are a lot of studies that examine the relationship between directors´ compensation and “board independence”, and directors´ compensation and firm performance, while a relatively few examine the relationship between disclosure on board compensation and directors´ compensation level.

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mail: Bassambaroma2@gmail.

comIn this context, this paper provides an empirical analysis of the transparency and voluntary disclosure on board remuneration and their impact on the level of directors' compensation in Egypt in order to determine whether the directors´ compensation is lower ("transparency control effect" and "transparency deterrent effect") or is higher (“effects of transparency on increasing competition in pay”) among firms with more transparency of directors´ compensation.

For this purposes, a unique panel of data has been put together from listed Egyptian companies for the period 2013-2018.