The Influence of Corporate Governance and Firm Performance in determining Financial Services Executive Remuneration in South Africa between 2002 to 2008
Date
2014-01-14
Authors
Naidoo, Avinash
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Abstract
Executive remuneration around the world is a contentious issue in light of, major corporate failures, the global finance crisis, the large disparity between the highest and lowest pay-scales within organisations, executive excesses, and the perceived lack of fairness of pay in relation to firm performance and shareholder value creation. The debate around executive remuneration continues to focus on the quantum of executive earnings with regards to firm performance, economic performance and ethical considerations.
Economic theory on executive remuneration focuses on compensation design to align the interests of shareholders and agents. Agency theory provides for mechanism of control to manage the behaviour of the agent and information asymmetry. The objective of corporate governance is to manage these relationships with the objective of creating value.
This research examines the relationship between firm performance and corporate governance compliance in relation to executive remuneration of financial service firms listed on the JSE between 2002 and 2008. This research uses the King II governance framework to judge the firm’s corporate governance compliance.
This research predicted a positive relationship between executive remuneration and firm performance, and a negative relationship between corporate governance compliance and executive remuneration. However, the overall finding is that there is no correlation between firm performance and executive remuneration taken as a whole. There are however indications of a weak correlation between the bonus component of executive remuneration and firm performance
Description
MBA thesis
Keywords
Remuneration policies, Executive remuneration