Disclosure of individualized executive compensation figures: An empirical analysis of compliance with the German Corporate Governance Code

Abstract

From 2002 to 2005, the German Corporate Governance Code advised that stock listed companies should (voluntarily) disclose individualized executive compensation figures. In a sample of big publicly traded German companies, we examine which determinants drive firms to comply with that "soft law" requirement. Using a probit model, we consider 15 explanatory variables. We find that block-holdings, average executive remuneration, book-to-market ratio and the percentage of union representatives in the supervisory board significantly decrease the likelihood of disclosures on individualized executive compensation numbers. Firm size, the absolute number of supervisory board members and the presence of takeover activity turn out as having a significant positive influence on the disclosure behavior. Additionally, we find that it was less likely in 2002 that individualized remuneration figures were published, indicating that Code recommendations are considered as more binding than Code suggestions.