Total Board Compensation, Governance and Performance of Spanish Listed Companies Rafel Crespÿ ´ -Cladera — Carles Gispert Abstract. In this paper we present empirical evidence on the relationship between board remuneration of a sample of large Spanish companies and a set of explanatory variables such as performance and size of the company. The objective is to provide additional empirical evidence based on the agency theory for the Spanish institutional context, which differs from most ‘Anglo-Saxon’ model studies. We focus on the impact of a company’s governance structure on the relationship between pay and performance. Specifically, we consider ownership concentration and firm leverage as key determinants of the board – shareholders relationship. Our results confirm the positive relationship between board remuneration and company performance, which is stronger for book values than for stock market measures. Industry performance also explains the remuneration and provides useful information for evaluating board behaviour. Company size is also related to board remuneration and affects the pay – performance relationship, although it is not relevant when we use an elasticity approach. Finally, the governance structure of companies is relevant when explaining the power of the compensation – performance relationship, and LABOUR 17 (1) 103–126 (2003) JEL G3, J33 # 2003 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. Rafel Crespÿ ´ -Cladera (author for correspondence), Universitat de les Illes Balears, Departament d’Economia de la Empresa, Campus Cra. Valldemossa, 07071 Palma de Mallorca, Spain. Tel: þ34 971173273; Fax: þ34 971173426; E-mail: rafel.crespi@uib.es. Carles Gispert, Departament d’Economia de l’Empresa. Universitat Autonoma de Barcelona, Campus Bellaterra, 08193 Barcelona, Spain. Tel: þ34 935811451; Fax: þ34 935812666; E-mail: carles.gispert@uab.es. The authors wish to thank Vicente Salas and Luc Renneboog for their comments on previous versions of the paper. We would also like to thank the participants at the ‘Workshop on Corporate Governance: Contracts and Managerial Incentives’ (Berlin), at the ‘Workshop on Corporate Governance’ (Cambridge), the ‘II Workshop on Finance’ (Segovia) and at the meeting of the ‘European Financial Management Association’ (EFMA, Paris). The usual disclaimer applies. This work has received financial support from the CICYT, Project BEC2001-2553-C03-03. Carles Gispert also acknowledges the financial support from The Netherlands Organisation for Scientific Research (NWO).