This study documents the danger of limiting the coverage of mandatory pay disclosure. Exploiting the 2013 rule change in Korea, we find that its restrictive coverage, confined to registered board members with total annual pay exceeding 500 million Korean won, led a large fraction of executives to evade disclosure through deregistration or pay-cuts. We also find that such evasion is mostly carried out by family executives in firms with high executive-to-worker pay ratios. If the original pay level is close to the threshold, we find that family executives choose pay-cuts over deregistration, as their preferred means of evasion.
Professor of Corporate Law, University of Sydney
Assistant Professor of Finance, Carroll School of Management, Boston College
Michael E. Patterson Professor of Law, NASDAQ Professor for Law and Economics of Capital Markets