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Article

Patti Cybinski and Carolyn Windsor

As a result of the Australian Government Productivity Commission's recommendation to mandate remuneration committee independence for ASX300 companies, this study aims to…

Abstract

Purpose

As a result of the Australian Government Productivity Commission's recommendation to mandate remuneration committee independence for ASX300 companies, this study aims to investigate whether voluntary remuneration committee independence aligns chief executive officer (CEO) total pay and bonuses with firm financial performance.

Design/methodology/approach

A series of hypotheses test the research question using multiple regressions for a sample of 143 ASX300 companies during 2001. This time was prior to strengthen corporate governance regulation, but after mandated executive remuneration disclosure, thus capturing varying levels of voluntary remuneration committee independence.

Findings

This study shows firm size is an influential factor in the relationship under investigation. ASX300 large firm remuneration committees link CEO total remuneration and bonuses to firm financial performance. Smaller ASX firm remuneration committees do not link either type of CEO remuneration to performance despite remuneration committee independence. Findings are mixed for medium-sized ASX300 firms.

Research limitations/implications

Limitations include the necessary time restriction to 2001 for sampling the ASX300 firms. The implication of this study's findings is that the proposed public policy for mandatory remuneration committee independence is not universally effective in linking CEO remuneration to firm financial performance for ASX300 firms.

Originality/value

This study contributes to the limited research on voluntary remuneration committee independence in relation to CEO remuneration and firm financial performance in the Australian context.

Details

Accounting Research Journal, vol. 26 no. 3
Type: Research Article
ISSN: 1030-9616

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Article

Sitara Karim

This study aims to investigate the relationship between remuneration packages [chief executive officer (CEO) and director] and independent corporate social responsibility…

Abstract

Purpose

This study aims to investigate the relationship between remuneration packages [chief executive officer (CEO) and director] and independent corporate social responsibility (CSR) practices (marketplace, environment, community, workplace and money spent on CSR) of 588 Malaysian listed firms during 2006–2017. Further, the study explored the moderating effect of board gender diversity on the remuneration-CSR nexus.

Design/methodology/approach

The dynamic estimator; namely, the system generalized method of moments given by Arellano and Bover (1995) has been used on the data set to control dynamic endogeneity, unobserved heterogeneity and simultaneity problems.

Findings

Findings indicate a weak relationship between remuneration and CSR where prior CEO remuneration negatively influences marketplace activities, environment-related activities and workplace practices. However, directors’ remuneration leaves no effect on socially responsible activities. Moreover, board gender diversity negatively moderates the CEO remuneration-CSR relationship and an insignificant moderating effect has been observed for directors’ remuneration-CSR nexus.

Practical implications

This study is particularly significant for regulatory bodies of Malaysia e.g. Securities Commission Malaysia, Bursa Malaysia, policymakers, investors and managers. For academia, this study fetches support from agency theory and overinvestment hypothesis to explain the relationships.

Originality/value

This paper is novel in providing empirical evidence on the moderating effect of board gender diversity on the relationship between remuneration and independent CSR activities for the first time. Moreover, this study has sourced several theoretical and practical implications. Then, the study uses a dynamic estimator that caters to the problems of endogeneity, simultaneity and heterogeneity.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

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Article

Sitara Karim

The prime objective of this study is to investigate the moderating influence of executive and independent female directors on the relationship between remuneration

Abstract

Purpose

The prime objective of this study is to investigate the moderating influence of executive and independent female directors on the relationship between remuneration packages (CEO and executive director) and socially responsible practices (marketplace, environment, community, workplace and money spent on CSR) of 483 Malaysian listed firms during 2006–2017.

Design/methodology/approach

The dynamic estimator, namely, system generalized method of moments (GMM) given by Blundell and Bond (1998) has been employed on the dataset to control dynamic endogeneity, unobserved heterogeneity and simultaneity problems.

Findings

Findings indicate that there is a significant relationship between remuneration patterns of CEOs and executive directors and socially responsible activities. In the same way, executive board gender diversity significantly, whereas independent board gender diversity insignificantly moderates the remuneration and CSR nexus.

Practical implications

This study is particularly significant for regulatory bodies of Malaysia, e.g. Securities Commission Malaysia, Bursa Malaysia, policy makers, investors and managers. For academia, this study fetches support from agency theory, stakeholder theory and upper echelons theory and presents integrated theoretical approach to be considered for future research.

Originality/value

This paper is unique in providing empirical evidence on the moderating effect of both executive and independent women directors on the relationship between remuneration patterns of CEOs and executive directors and independent CSR activities for the first time. Moreover, this study has sourced several theoretical and practical implications. And, the study employs dynamic estimator for precise and concrete results.

Details

Equality, Diversity and Inclusion: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-7149

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Article

Ling Jong and Poh-Ling Ho

The purpose of this paper is to examine the influence of family directors and independent directors on executive remuneration of listed family firms in Malaysia, and their…

Abstract

Purpose

The purpose of this paper is to examine the influence of family directors and independent directors on executive remuneration of listed family firms in Malaysia, and their involvement in remuneration committee on executive remuneration.

Design/methodology/approach

Fixed effect estimation is employed to examine 1,395 firm-year observations from 2010 to 2014.

Findings

Family and independent directors do not have statistically significant influence on executive remuneration. Rather, family ownership exerts a significant positive influence on executive remuneration. This study also reveals that the interaction of family CEOs with the family directors on remuneration committee exerts a significant positive influence on executive remuneration.

Research limitations/implications

The measurement of executive remuneration excludes the share options due to the non-disclosure of this information in the annual reports.

Practical implications

The findings would be useful to the policy-makers and regulators in appraising the governance measures of remuneration arrangement.

Originality/value

This study premises on the Type II agency conflict between controlling shareholders and minority shareholders. Independent directors could not mitigate the Type II agency conflict via the governance of executive remuneration. They are not the effective governance mechanism that the minority shareholders can rely on. The additional analyses provide theoretical implication that the pervasive Type II agency conflict is ameliorated when the CEOs do not have family relationships with the controlling family shareholders.

Details

Asian Review of Accounting, vol. 28 no. 1
Type: Research Article
ISSN: 1321-7348

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Article

Sebastien Deschenes, Hamadou Boubacar, Miguel Rojas and Tania Morris

The purpose of this article is to examine if certain board characteristics have an impact on the total remuneration of top management and the ratio of stock-based…

Abstract

Purpose

The purpose of this article is to examine if certain board characteristics have an impact on the total remuneration of top management and the ratio of stock-based remuneration to total top-management remuneration.

Design/methodology/approach

The study draws on data from the largest public Canadian companies, the constituents of the TSX/60 index. The study controls for firm size and profitability.

Findings

The authors concludes that total remuneration of top management is directly linked to board-member total remuneration and the board average number of director-tenure years. The study also shows that the ratio of stock-based to total top-management remuneration is positively affected by the percentage of independent directors, total remuneration of board directors, the ratio of stock-based remuneration of directors to their total remuneration and the average number of tenure years of the board of directors.

Practical implications

If regulators are determined to curb the excesses in top-management remuneration by means of promoting boards with certain characteristics, they should implement measures facilitating the control of directors’ remuneration and tenure, to discourage cronyistic behavior. Good corporate governance requires that the board act as a counterbalance to top management, ensuring that a substantial percentage of top-executive total compensation is variable, and not fixed. According to our findings, the boards that are the most likely to hold managerial avoidance of variable pay in check are those favoring director independence, variable director remuneration and longer director tenures.

Social implications

The present article examines specifically the latter aspect, namely, the role of board characteristics (independence, size, compensation, board director ownership and tenure, etc.) in the determination of top-management compensation. This relationship is important because it allows us to further the analysis of corporate governance. If the above-mentioned traits of boards have a meaningful relationship with the compensation of the top management, one might conclude that certain practices in the composition of boards could influence good corporate governance practices. This is relevant for regulatory agencies, for investors and for corporations.

Originality/value

The article adds to the extant literature in a number of ways. Firstly, it considers the role of the traits of the board in the determination of the compensation of the top-management teams, and not only of the chief executive officer, as is the focus of previous literature. Secondly, the article focuses on the power interplay between boards and managers, and, more particularly, on the ability of boards to be an effective mechanism of corporate governance. Finally, the article examines the potential impact of board traits in the determination of top-management compensation in the context of Canadian firms, a subject that has received less attention from academic research, which has mostly concentrated on analyzing the issue in the US context.

Details

International Journal of Accounting & Information Management, vol. 23 no. 1
Type: Research Article
ISSN: 1834-7649

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Article

Zahid Riaz

This paper aims to explore an alternative approach to regulation for addressing governance problems relating to director and executive remuneration in publicly listed…

Abstract

Purpose

This paper aims to explore an alternative approach to regulation for addressing governance problems relating to director and executive remuneration in publicly listed firms. The author investigates the development of hybrid regulatory framework, composed of state regulation and self-regulation, for remuneration governance in Australia.

Design/methodology/approach

The synthesis of constructs borrowed from agency and institutional theories and its contextual analysis examines the effectiveness of formal (state regulation) and informal (self-regulation) institutions for the development of a hybrid of regulation. Thereafter, the author examines the impact of hybrid regulation on remuneration disclosure behavior in Australia.

Findings

The author finds that improvement in disclosure is primarily driven by the establishment of remuneration committees and separate role of chief executive officer (CEO) and chairperson but weakened by the presence of CEO at remuneration committee and presence of remuneration consultant.

Originality/value

Global crises have called for greater transparency and protection of investors through state regulation alone. However, corporate governance, being a social practice that is shaped by diverse interests, calls for a holistic approach. A useful contribution of this study is that through an in-depth examination into the stages and actors of the government interventions involving the balancing of tension between conflicting forces, it provides insights for developing an effective regulatory hybrid which has greater acceptance for corporate governance. In conclusion, it implies the significance of priming the social arena through active engagement of diverse market forces prior to introducing state regulation.

Details

Corporate Governance, vol. 16 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

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Article

Husna Siraji Nyambia and Hamdino Hamdan

This study extensively aims to investigate the effects of different aspects of corporate governance (CG) mechanism, including board size, executive directors…

Abstract

Purpose

This study extensively aims to investigate the effects of different aspects of corporate governance (CG) mechanism, including board size, executive directors’ shareholdings, Chief Executive Officer (CEO) duality, a family member as the CEO and/or chairperson of the board, independent directors in remuneration committee and number of board meeting, on executive directors’ remuneration in small firms listed on Bursa Malaysia (BM).

Design/methodology/approach

The sample of this study consists of 173 bottom-listed companies from Bursa Malaysia in Year 2010. The Year 2010 was chosen because the disclosure of remuneration committee activities and directors’ pay structure is required under the revised Malaysia Code of Corporate Governance, 2007. Furthermore, the period selected is after the global economic crisis (2008), which may have an effect on the remuneration structure in small firms. The ordinary least squares regression was used to estimate the relationship between remuneration as dependent variable and other independent variables.

Findings

A finding from this study reveals that there is a significant positive relationship between executive ownership and executive remuneration, and between board size and executive remuneration. The results provide evidence that the family members manipulate power and control remuneration in small firms. This indicates that the independent directors are not truly independent to monitor and control the firm activities, including minimizing the excessive remuneration.

Research limitations/implications

This study examines how the corporate governance (CG) affects remuneration among 173 small firms in Malaysia based on market capitalization, for one year, 2010. Hence, the results may not be generalizable to other periods or types of the companies. This shows the possibility of the absence of some additional variables in the research model and hence a limitation to the findings of the study. Although the study is being parsimonious in the choice of relevant variables, prior literature serves the guide in the selection of the used variables. This therefore gives room for future research using the potential omitted variables. Furthermore, the study focuses on total remuneration, such as fees, salaries, bonuses and benefits in kind, which makes aggregate directors’ remuneration. However, this study did not consider the remuneration related to stock options. Finally, this study only uses secondary data; hence, it could be interesting to use other instruments to collect data like a questionnaire to add more weight to the research. This study only uses one-year data; therefore, impact of changes between years cannot be analysed.

Originality/value

Results of the study provide evidence that the family members manipulate power and control remuneration in small firms. They reduce the effectiveness of non-executive directors because most of them are appointed by a family member and not socially responsible to their stakeholders.

Details

Social Responsibility Journal, vol. 14 no. 4
Type: Research Article
ISSN: 1747-1117

Keywords

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Article

Michael Seamer and Adrian Melia

This paper aims to investigate the incidence of remunerating Australian Securities Exchange (ASX)-listed non-executive directors (NEDs) with options and to determine…

Abstract

Purpose

This paper aims to investigate the incidence of remunerating Australian Securities Exchange (ASX)-listed non-executive directors (NEDs) with options and to determine whether companies that fail to adhere to NED remuneration recommendations share a common corporate governance profile. Despite corporate regulators condemning the practice of remunerating NEDs with stock options, there is a paucity of evidence regarding its prevalence in Australia.

Design/methodology/approach

Focusing on ASX400 companies during 2008, a series of hypotheses relating NED stock option remuneration and corporate governance are tested using logistic regression.

Findings

The study shows that the prevalence and quantum of NED option payments during 2008 was considerable with 73 of the ASX400 companies, including options in NED remuneration (option payers). Comparison of the corporate governance characteristics of option payers to that of a matched control group (non-option payers) highlighted both the existence and independence of the remuneration committee as critical in ensuring NED remuneration practices comply with regulator recommendations.

Research limitations/implications

These results provide regulators and stakeholder groups with additional evidence to continue to call for corporate governance reforms to ensure that corporate remuneration practices are in the best interest of shareholders.

Originality/value

This study is the first to highlight the extent to which Australian-listed company NED remuneration practices fail to comply with regulator recommendations and adds to the limited research on remuneration committee effectiveness.

Details

Accounting Research Journal, vol. 28 no. 3
Type: Research Article
ISSN: 1030-9616

Keywords

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Article

Fernando Matías‐Reche, Enrique A. Rubio‐López and Antonio Rueda‐Manzanares

The purpose of this paper is to consider whether those nonprofit organizations which exhibit more similar characteristics to market organizations regarding the percentage…

Abstract

Purpose

The purpose of this paper is to consider whether those nonprofit organizations which exhibit more similar characteristics to market organizations regarding the percentage of paid employees with functions similar to the ones in market organizations in relationship with total workers have a different model of human resource management in relation to their CEO than those organizations which exhibit fewer similarities to market organizations.

Design/methodology/approach

The hypotheses proposed in this study have been tested using a sample of 1,999 Spanish nonprofit organizations.

Findings

The results show that the CEOs of nonprofit organizations with most similarity to for‐profit organizations will have a more formalized employment relationship and a higher level of education than the CEOs of nonprofits with least similarity to for‐profit organizations.

Research limitations/implications

This paper has several limitations from the heterogeneity of the sample to the fact that the conducted study is a cross‐sectional study of the current situation.

Practical implications

The practical implications of this paper imply that nonprofit organizations which are evolving, in terms of their workforce, towards a high percentage of paid employees or those who are already in this position will have to adapt to the way in which for‐profit organizations operate if they wish to achieve levels of effectiveness and efficiency to make them competitive in this sector.

Originality/value

One of the reasons for proposing this work is the small number of empirical studies trying to address systematically the relationship between the CEO and the characteristics of nonprofit organizations.

Details

Employee Relations, vol. 31 no. 5
Type: Research Article
ISSN: 0142-5455

Keywords

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Article

Nader Elsayed and Hany Elbardan

While there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While…

Abstract

Purpose

While there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While executive compensation is sensitive to firm performance, firm performance is also likely to be affected by executive compensation. Adopting multiple theoretical perspectives, the purpose of this paper is to examine whether executive compensation has a greater influence on firm performance or whether the latter has a greater influence on compensation.

Design/methodology/approach

Using data from a five-year period (2010-2014) for Financial Times and Stock Exchange 350 companies, the authors employ a set of simultaneous equation modelling to jointly investigate, after accounting for endogeneity problem, the mutual association of executive compensation and firm performance by employing four control variables (board size, non-executive directors, leverage and boardroom ownership).

Findings

The authors find strong evidence for the greater influence of executive compensation on firm performance than the pay-performance framework. This finding supports the tournament theory compared with the agency perspective.

Research limitations/implications

Inevitably, there are limitations in a wide-ranging study of this nature that could be addressed in future research. As any empirical study utilising company data, there may be concerns to the effect of survivorship bias and the manner in which companies have reorganised, if there is any, themselves during the period under examination. There are also issues as to missing data, some measures relating to both executive compensation and corporate governance are not provided by the BoardEx database.

Practical implications

The study results provide evidence that using the tournament perspective by remuneration committees as a guide for determining executive compensation helps in achieving better performance. This helps in developing appropriate mechanisms for setting executive remuneration.

Originality/value

This paper combines an empirical investigation of the frameworks of pay-performance and performance-pay and develops a system of six simultaneous equations to examine the associations between executive compensation and firm performance.

Details

Journal of Applied Accounting Research, vol. 19 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

1 – 10 of over 2000