We examine the effect of board members with venture capital experience (i.e., VC directors) on executive incentives at publicly listed firms. VC directors serving on the compensation committee are associated with greater CEO risk-taking incentives (i.e., vega) and greater pay-for-performance sensitivity (i.e., delta). These effects are more substantial if VC directors are from highly reputable VC firms. Using Regulation S-K requirements to disclose attributes of nominated directors as an instrument, we show that these results are causal. We also document that prior finding of greater research intensity and innovation when VC directors serve on boards of public firms are in part explained by the presence of increased risk-taking incentives of the CEO instilled by such directors. Lastly, we find that having VC directors on nominating and/or governance committees is associated with a higher likelihood of forced CEO turnover.

The independent directors of a board can impact CEO pay-performance more effectively if a compensation committee provides information and assist them in designing relevant executive pay schemes. On the basis of this idea, we developed and tested the hypotheses that Chinese firms with a compensation committee have a closer CEO pay link with performance when a larger proportion of independent directors serves on the board. We focused primarily on the effect of a compensation committee on CEO pay-performance relation as a consequence of its help for the board and found that board independence produces a stronger relationship between executive compensation and firm performance in Chinese listed firms. This association is more evident in those firms which have a compensation committee. Our findings suggest that the interaction between independent directors on the board and a compensation committee has important consequences for CEO incentive systems as well as corporate governance structures in China.