2019 GCGC

7-8 June 2019

Perils of Limiting the Coverage of Mandatory Pay Disclosure: The Korean Experience


Woochan Kim

Professor of Finance Korea University Business School


Tobias Tröger

Program Director "Corporate Governance and Corporate Finance", Professor of Private Law, Commercial and Business Law Goethe University Research Center SAFE


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.

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