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Article
Publication date: 13 July 2015

Ernestine Ndzi

The purpose of this paper is to investigate the nature of advice that the remuneration consultants offer to the companies on executive pay. It explores how the advice…

Abstract

Purpose

The purpose of this paper is to investigate the nature of advice that the remuneration consultants offer to the companies on executive pay. It explores how the advice offered affects the level of executive remuneration. Furthermore, it investigates whether the nature of advice offered forms part of the reasons why remuneration consultants have been criticised to be correlated with high executive pay.

Design/methodology/approach

This paper analysis the data obtained from interviewing remuneration consultants from prominent consultancy firms that operate in the UK and the USA.

Findings

This paper demonstrates that remuneration consultants’ advice on executive remuneration is not always objective. The nature of advice depends on whether the consultants have a balance of portfolio of companies (self-interest) or whether they have the courage to stand up to confrontations from the executives (fear of executives). This study shows that the purpose of using remuneration consultants in advising on executive remuneration is defeated. Also, the practice pushes up pay levels.

Research limitations/implications

The research focused on large consultancy firm operating in the UK and/or the USA. Access to the participants was very difficult due to their busy schedules.

Practical implications

This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels.

Social implications

This paper will inform companies on the nature of advice that remuneration consultant’s offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remuneration policy in the annual general meeting.

Originality/value

This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels. This paper will inform companies on the nature of advice that remuneration consultant’s offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remuneration policy in the annual general meeting. Lastly, it informs policymakers on the grey areas of practice that requires best practice.

Details

International Journal of Law and Management, vol. 57 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 9 November 2015

Ernestine Ndzi

The purpose of this paper is to investigate the factors that remuneration consultants consider when selecting comparator groups for executive remuneration benchmarking. It…

Abstract

Purpose

The purpose of this paper is to investigate the factors that remuneration consultants consider when selecting comparator groups for executive remuneration benchmarking. It explores how the different factors influence the level of pay and whether the factors encourage pay-for-performance. Furthermore, it investigates whether the factors used form part of the reasons why remuneration consultants have been criticised to be correlated with high executive pay.

Design/methodology/approach

This paper analysis the data obtained from interviewing remuneration consultants from prominent consultancy firms that operate in the UK and the USA.

Findings

This paper demonstrates that there is no uniformity in the factors used by remuneration consultants when selecting comparator groups for executive remuneration benchmarking. The paper shows that company performance is not a major factor considered justifying why executive pay is not linked to company performance. The paper further demonstrates that the factors that remuneration consultants consider in selecting comparator groups for executive remuneration benchmarking justify high pay and affirm that remuneration consultants are associated with high pay.

Originality/value

This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels and the weak link between pay and performance. This paper will inform companies on what to demand from remuneration consultants when hiring their services. Second, it will provide the shareholders with vital information that they need to vote on remuneration reports in the annual general meeting. Finally, it informs policy makers on the grey areas of practice that require best practice.

Details

International Journal of Law and Management, vol. 57 no. 6
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 7 October 2019

Ernestine Gheyoh Ndzi

The paper aims to examine the role of human greed in the determination of executive remuneration in the UK.

Abstract

Purpose

The paper aims to examine the role of human greed in the determination of executive remuneration in the UK.

Design/methodology/approach

The paper reviews the past and existing regulation and corporate governance recommendations on executive remuneration.

Findings

The paper demonstrates that the failure of regulatory mechanisms to curb excessive executive remuneration can be justified on the grounds of human greed. Greed is facilitated by the potential conflict of interest that exists as a result of the executives’ position in the company. The position of the law has given greed the opportunity to manifest, making it quite difficult for executive remuneration to be effectively regulated.

Originality/value

The paper adds to the existing debate on excessive executive remuneration by demonstrating that human greed is the basis of excessive executive remuneration on which limited literature exists.

Details

Journal of Financial Crime, vol. 26 no. 4
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 10 June 2014

Suveera Gill

The present paper aims to question the rationale of paying a high remuneration to executives who are presiding over loss-making companies. The neoclassical wage model…

Abstract

Purpose

The present paper aims to question the rationale of paying a high remuneration to executives who are presiding over loss-making companies. The neoclassical wage model asserts that the remuneration of executive directors is positively related to their company’s financial performance. However, evidence suggests that executives can obtain a higher level of personal compensation regardless of how the company performs.

Design/methodology/approach

The relationship between executive remuneration and performance for viable but loss-making Bombay Stock Exchange (BSE)-listed companies has been studied for 2009-2011. The paper examines the determinants of the level of executive remuneration as well as discerns the strength of the remuneration–performance relationship, both at the overall and across various board hierarchical levels, using the JM sensitivity and HL elasticity models.

Findings

Results for univariate and multivariate analyses highlight that both the remuneration–performance sensitivity and elasticity are weak. Further, factors such as ownership structure, risk and industry class moderate the remuneration–performance elasticity. It seems that it is only the lower rung of executive directors whose cash remuneration gets adversely affected with the performance of the company.

Originality/value

The paper offers valuable insight into the complexities relating to the remuneration performance relationship by putting forth a multi-theoretical perspective. The fact that executives are drawing a whopping remuneration while their companies continue to report disappointing results suggests that a catalytic role has to be played by the government so as to ensure that executive remuneration policies and practices are consistent with the company’s long-term objectives and control environment.

Details

Journal of Indian Business Research, vol. 6 no. 2
Type: Research Article
ISSN: 1755-4195

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Article
Publication date: 12 March 2018

Lakhwinder Singh Kang and Payal Nanda

This study aims to analyse the impact of company performance, company size, ownership structure, board characteristics and other company characteristics on the disclosure…

Abstract

Purpose

This study aims to analyse the impact of company performance, company size, ownership structure, board characteristics and other company characteristics on the disclosure of managerial remuneration in 134 listed companies in India from the year 2003 to 2012.

Design/methodology/approach

A disclosure and compliance index is developed on the basis of 14 statements prepared regarding the disclosure of managerial remuneration in corporate governance reports of companies. The Papke and Wooldridge (2008) approach is adopted to estimate fractional response models, and fractional probit model is estimated using the generalised estimating equation approach, with an independent working correlation matrix to determine the effect of various company attributes on managerial remuneration disclosure.

Findings

The study shows that company size and the presence of remuneration committee are significantly related with the disclosure and compliance index of managerial remuneration. Remuneration disclosure is found to be time-dependent as time dummies for all years are found to be significant.

Research limitations/implications

This study highlights the importance of the formation of remuneration committees on corporate boards. The findings of the present study can be used as inputs for promoting better compliance and comprehensive executive remuneration disclosure.

Originality/value

Nothing concrete in the field of managerial remuneration disclosure (to the best of researcher’s knowledge) has yet been done in an emerging economy such as India. This study aims to address this gap by deriving a disclosure and compliance index for managerial remuneration disclosure and examining the impact of various corporate attributes on it.

Details

Journal of Financial Reporting and Accounting, vol. 16 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 15 January 2021

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
Publication date: 6 November 2020

Irfan Saleem, Eric Lamarque and Rashedul Hasan

The purpose of this study is to study the evolution of French corporate governance law in light of collibration approach and bring statistical evidence from French…

Abstract

Purpose

The purpose of this study is to study the evolution of French corporate governance law in light of collibration approach and bring statistical evidence from French Companies Executive Compensation practices.

Design/methodology/approach

The study has used mixed methods. In the first part, the authors analyzed the French laws in the light of collibration. In the second part of the study, the authors used unbalanced panel data to test the hypotheses related to executive remuneration based on the theoretical underpinning of collibration. Data for 173 firms listed in the Euronext Paris Index is collected from the Bloomberg database. Seemingly unrelated regression (SUR) analysis is performed to investigate the impact of collibration on the governance disclosure of French-listed firms.

Findings

SUR results indicate that board size plays a significant role in the governance disclosure before collibration. However, the collibration model is found to be more effective in ensuring the desired level of governance disclosure. Under the collibration approach, executive remuneration, frequency of board meetings, executive directors in the compensation committee and independent directors play a significant role in governance disclosure. Board size, however, does not have a substantial impact on governance disclosure after the adoption of collibration mechanism.

Research limitations/implications

Results provided by this study can allow regulators to improve corporate disclosure regime in France, which could play a vital role in safeguarding the interest of stakeholder.

Originality/value

The authors study the impact of collibration on the extent of governance disclosure in the context of France. Empirical evidence on the implication of collibration as governance mechanisms to enhance stakeholder confidence is rare and allows this study to make a unique contribution to the governance literature.

Details

International Journal of Law and Management, vol. 63 no. 2
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 8 November 2019

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
Publication date: 13 March 2017

Stephen J. Perkins

The purpose of this paper is to reflect theoretically on a quarter-century of attempts to codify “best practice” standards related to oversight of and reporting on…

Abstract

Purpose

The purpose of this paper is to reflect theoretically on a quarter-century of attempts to codify “best practice” standards related to oversight of and reporting on executive remuneration. Issues around the regulation of UK executive remuneration are analysed focussing on decision making by elite actors, informed by corporate governance codification artefacts and theoretical considerations inspired by notions of the social construction of reality.

Design/methodology/approach

Using documentary materials to trace evolution of executive remuneration regulation in the UK, consideration is given to the social antecedents of processes governing corporate board remuneration committee practices. The paper reconstructs the social construction of the UK Corporate Governance Code and draws on relevant theoretically inclined literature to help make sense of processes involved.

Findings

Shaping the problems, to be addressed as “legitimate problems”, is core to efforts intended to create “persuasive narratives” around how UK executive remuneration should be regulated.

Research limitations/implications

The paper sketches an agenda for subsequent empirical “field” investigation to assess the social antecedents of UK executive remuneration outcomes.

Practical implications

Offering an alternative way of thinking about executive reward and on-going controversy as to how it may be legitimately regulated, informed by contextual considerations.

Originality/value

A novel look at executive remuneration from a social construction of reality perspective. Adding value to public debate on organisational effectiveness at a time of warnings from luminaries such as the Bank of England governor about the adverse social impact of “stateless companies” and calls for action against unfairness in income distribution.

Details

Journal of Organizational Effectiveness: People and Performance, vol. 4 no. 1
Type: Research Article
ISSN: 2051-6614

Keywords

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Article
Publication date: 1 October 2018

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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