The relationship between Chief Executive Officer (CEO) remuneration and organisation performance has been a topic of close scrutiny, especially since the global financial crisis. Optimal contracting relies on the premise that effective incentives will link organisation financial performance and CEO remuneration in ways that will be in the best interests of both shareholders and CEOs.
The purpose of this research study was to investigate the relationship between CEO remuneration and organisation performance in South Africa between 2006 and 2012 and to determine whether the two constructs were positively correlated.
The study provides an evidenced-based understanding of the nature of the CEO pay-performance relationship in South Africa. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
The financial results and CEO remuneration of 21 of the top 40 listed companies on the Johannesburg Stock Exchange were analysed for the period 2006–2012. The research was a quantitative, archival study. The primary statistical techniques used in the study were correlation analysis and multiple regression analysis.
The primary finding of the current research indicates that between 2006 and 2012 organisation executives have noticeably been moving away from focusing on short-term incentives, which are categorised as performance-related elements of remuneration packages. Based on these findings, it is evident that the relationship between executive remuneration and organisational financial performance has been experiencing a decline, especially since the 2008 global financial crisis. The decline has predominantly been due to a move away from performance-related elements of remuneration contracts by CEOs, creating a disconnect between CEO remuneration and organisational performance. The findings suggest that, to a large extent, remuneration contracts for CEOs are no longer optimal for the organisation and its shareholders, but are influenced by the propensity of executives to enhance their own remuneration. There exists a link between short-term incentives received by CEOs and accounting-based organisational performance measures; on the other hand, fixed pay linked with organisational performance measures continue to be eroded as organisations’ executives become more innovative as they are noticeably moving away from focusing on short-term incentives.
A stronger test of the pay-performance link and the power of incentive design are required in order to ensure that executives are rewarded or penalised for poor performance. The question of how executives are paid also needs to be considered.
This research contributes to the literature on CEO remuneration by providing an evidenced-based understanding of the nature of the CEO pay-performance relationship in South Africa. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
The primary challenge in the executive pay-performance relationship is finding a mutually beneficial balance between executive remuneration and organisational performance. This challenge is compounded by the fact that there is no universally accepted understanding of the strength and significance of the relationship. In addition, the measurement of organisational performance is itself open to interpretation with a variety of conflicting indicators suggested as valid and reliable. The lack of clarity in the understanding and measurement of the constructs within the executive pay-performance relationship makes the creation of a model to structure executive remuneration difficult. A longitudinal, evidence-based understanding of the relationship between executive pay and organisational performance is necessary to determine a meaningful and optimal model of executive remuneration.
Chief Executive Officers (CEOs) assume the highest levels of responsibility and accountability for an organisation and its performance on behalf of the organisation's shareholders (Kaplan,
There is a well-recognised challenge in finding a balance between remuneration that will be enticing enough to keep executives in the employ of the organisation without over-compensating them when organisation performance is not favourable (Bebchuk & Fried,
According to researchers such as Shaw (
Much criticism has been levelled at organisations and their remuneration committees for increases in executive remuneration in the face of disappointing financial results (Lindqvist & Grunditz,
In South Africa, the
There are empirical findings that support both a relationship between CEO pay and organisational performance, as well as little or no relationship. In seminal pieces of research, Jensen and Murphy (
To facilitate an optimal contract between a CEO and shareholders, the incentives of the CEO need to be aligned with the interests of shareholders, thus creating value for both through the pay–performance relationship (O’ Byrne & Gressle,
The primary research objectives were as follows:
To establish if there were any structural changes that occurred in South Africa after the 2008 global financial crisis with regard to the mix in the remuneration components received by CEOs.
To establish the closest link (correlation) between CEO remuneration and financial performance of an organisation when considering the most commonly used financial performance measures.
This research contributes to the literature on CEO remuneration by providing an evidenced-based understanding of the nature of the CEO pay-performance relationship in South Africa. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
Previous research asserts that performance-based elements of CEO remuneration are necessary to justify the high remuneration packages of executives. The research points to the long-term dilemma that will arise for boards of directors if they become reluctant to either reward executives for superior performance or penalise them for poor performance.
A more detailed review of the literature follows in the next section. The research design section outlines the longitudinal, quantitative, archival research method selected and describes the sampling rationale employed. The results of the study are then presented and discussed. The article concludes with a brief discussion of the research limitations and practical implications for remuneration practitioners.
CEO remuneration is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organisation. The concept of executive remuneration includes all payments made to executive members of the board including the CEO (Bussin,
Excessive pay can be seen as additional amounts of money that need to be paid for services and activities that were not originally planned or taken into account. Despite substantial heterogeneity in remuneration practices across different organisations, most CEO remuneration packages consist of salary, annual bonus, short-term and long-term performance incentives (Frydman & Jenter,
Ellig (
The principal-agent theory needs to be understood in order to gain an understanding of the executive remuneration process. Laffont and Martimort (
Frydman and Jenter (
Organisations should appoint a remuneration committee or other such appropriate board committee, consisting entirely or mainly of independent non-executive directors, to make recommendations regarding executive and CEO pay. The principal-agent theory assumes it is the purpose of the board to monitor the CEO. However, O’ Reilly and Main (
King III (2009) discusses the remuneration committee in detail and adds that it should be the duty of the remuneration committee to assist the board in setting the various salary bands within the organisation, particularly for the remuneration packages of the senior executives. King III (2009) states that remuneration committees should keep the long-term goals of the organisation in mind when giving remuneration advice.
Bebchuk and Fried (
According to Bebchuk and Fried (
In contrast to the optimal contracting approach, the managerial power approach considers remuneration received by executives not only as a potential instrument for dealing with agency problems, but also as part of the agency problem (Frydman & Jenter,
According to the managerial power approach, board-approved executive remuneration contracts often deviate from optimal contracting arrangements. Factors that enable this deviation include: boards of directors being subjected to influence by executives, boards being sympathetic to executives or boards being incompetent in overseeing remuneration contracts (Bebchuk
In summary, there are weaknesses in the optimal contracting approach that are highlighted by the managerial power approach. Despite these weaknesses, that the CEO exerts too much power over the negotiation of the remuneration package, it is still widely believed that executive rewards can be used to align the interests of executives to those of the shareholders and thereby reduce possible agency costs (Edmans & Gabaix,
Organisational performance can be measured in many different ways using accounting-based measures and market-based measures (Attaway,
In the empirical compensation literature there seems to be limited consensus on the optimal measure of company performance as researchers have measured organisational performance in many different ways (Attaway,
Since the early 2000s executive compensation levels have increased dramatically. Managerial power and optimal contracting have been offered as leading reasons for this increase (Frydman & Jenter,
Jensen and Murphy (
Although the theoretical and empirical literature on executive remuneration is fairly well developed, it is far from complete, according to Canarella and Gasparyan (
The literature indicates that there is limited consensus on the optimal measure of organisational financial performance as researchers continue to assess organisational performance in many different ways (Attaway,
Firth
In contrast to these and other studies which found a positive and significant relationship between CEO pay and organisation performance, Jensen and Murphy (
Another study, conducted in the UK by Haynes
In South Africa, a CEO pay-performance research study by Shaw (
Shaw (
A similar study on South African financial institutions conducted by Van Blerck (
Whilst CEOs are responsible and accountable for their respective organisations’ performance, and are highly incentivised through remuneration structures to ensure they perform their duties solely in the best interest of the shareholders, in recent years CEOs’ remunerations have been in the limelight and often for the wrong reasons (Anderson & Kleiner,
The public continues on the perception that executives receive excessive salaries and bonuses (Leon,
The academic researchers continue to focus on establishing the relationship between executives’ remunerations and organisation performance. The remuneration of organisations’ top executives should be virtually dependent on organisation performance and organisations that evaluate their CEOs will be successful overall even though the evaluation process is time consuming (Anderson & Kleiner,
The literature reviewed indicates that research on executive pay-performance, especially for CEOs, has yielded mixed and inconclusive results due to the principal-agent problem and managerial power approach. According to the agency framework, executive remuneration is an efficient means of aligning executive interests more closely with those of shareholders through a remuneration contract that rewards superior company performance (Jensen & Meckling,
The corporate governance and disclosure requirements that are currently applicable in South Africa through the implementation of the
This research study was an empirical exploratory quantitative study that was aimed at assessing the relationship between CEO total remuneration and the financial performance of an organisation as this approach was the best way to answer the research questions. The total remuneration consisted of FP (including benefits) and STIs (these incentives measure performance for up to 1 year and typically include profit share, commission and bonus schemes).
The research took the form of a desktop study and was archival in nature, using secondary sources to provide the organisation financials and their respective executive remuneration data for CEOs. The research approach was ex-post facto in nature in that the focus was on reporting the characteristics of the variables rather than playing any role in manipulating them (Saunders & Lewis,
The research was also longitudinal in nature, allowing for the identification of trends and the isolation of any unusual observations either in the events or the data.
The research data utilised were obtained for publicly listed organisations on the Johannesburg Stock Exchange (JSE). According to the JSE listing requirements, listed organisations are contractually bound to adopt King III and the
The research data was drawn from the McGregor BFA database. McGregor BFA is South Africa's provider of financial data feeds and analysis tools and covers the JSE and global share prices as well as organisation information including annual reports and financial statements.
The research utilised publicly listed organisations on the JSE for the time period 2006–2012. The combined number of organisations listed on the JSE is 472 (JSE,
The list of organisations on the JSE top 40 changes from year to year as a result of some organisations being replaced by organisations with growing MC effectively moving ‘up the list’. The resulting number of organisations on the JSE top 40 between 2006 and 2012 was 57 in total. These 57 organisations were subjected to the following criteria for inclusion in the sample:
The organisation had to have been on the JSE top 40 for the entire research period (2006–2012); this reduced the number of organisations to 27.
The secondary research data required for the current research had to be available either from the McGregor BFA database or financial statements of the respective organisation; this reduced the number of organisations to 22.
More than one organisation with the same executive receiving the same remuneration was considered as one organisation and the different organisation performance measures were added; this reduced the number of organisations to 21.
List of organisations included in the research sample.
1 | ABSA Group Ltd | Financials |
2 | Anglo American Platinum Ltd | Basic materials |
3 | Anglo American PLC | Basic materials |
4 | BHP Billiton PLC | Basic materials |
5 | Exxaro Resources Ltd | Basic materials |
6 | FirstRand Ltd | Financials |
7 | Impala Platinum Holdings Ltd | Basic materials |
8 | Intu Properties PLC | Financials |
9 | Investec PLC | Financials |
10 | Kumba Iron Ore Ltd | Basic materials |
11 | MTN Group Ltd | Telecommunications |
12 | Naspers Ltd | Consumer Services |
13 | Nedbank Group Ltd | Financials |
14 | Old Mutual PLC | Financials |
15 | Remgro Ltd | Industrials |
16 | RMB Holdings Ltd | Financials |
17 | SABMiller PLC | Consumer goods |
18 | Sanlam Ltd | Financials |
19 | Sasol Ltd | Oil and gas |
20 | Standard Bank Group Ltd | Financials |
21 | Tiger Brands Ltd | Consumer goods |
Note: listed alphabetically.
Total remuneration was defined to include FP, the combination of the basic salary and benefits (car benefit, other benefits and cost of employee benefits) received during the organisation's financial year, and STIs (these incentives measure performance for up to 1 year, and typically include profit share, commission and bonus schemes) (21st Century Pay Solutions,
Ideally, long-term incentives (LTIs) should be included in studies with the objective of determining the relationship between CEO remuneration and the financial performance of an organisation (Lippert & Porter,
The second unit of analysis was the financial performance of the organisations. For the purposes of this research, and largely based on past research work on pay-performance sensitivity, the following organisation financial performance measures were chosen (their definitions are sourced from McGregor BFA and Ward & Price,
The relationship between CEO remuneration and measures of organisation performance were observed over a period of 7 years between 2006 and 2012. The time period included the recessionary decline phase due to the 2008 global financial crisis and the August 2011 stock market fall (Jensen & Murphy,
Correlation analysis and multiple regression analysis were used to determine two measures of the strength of the pay-performance relationship, namely the coefficient of correlation and the coefficient of determination respectively.
CEO fixed pay summary (R ’000).
Year | Mean | Standard deviation | Minimum | Median | Maximum |
---|---|---|---|---|---|
2006 | 6655 | 4759 | 2153 | 5118 | 18 612 |
2007 | 7861 | 6265 | 2353 | 5774 | 25 694 |
2008 | 8102 | 5800 | 2211 | 6153 | 21 392 |
2009 | 7996 | 5107 | 2433 | 6368 | 21 701 |
2010 | 8821 | 5752 | 2637 | 6558 | 22 104 |
2011 | 9095 | 5662 | 2957 | 6913 | 23 590 |
2012 | 9814 | 6244 | 1359 | 7698 | 24 697 |
Graphical representation of the descriptive statistics for CEO fixed pay.
CEO short-term incentives summary (R ’000).
Year | Mean | Standard deviation | Minimum | Median | Maximum |
---|---|---|---|---|---|
2006 | 8381 | 7906 | 0 | 6500 | 31 797 |
2007 | 10 182 | 9399 | 0 | 8498 | 39 881 |
2008 | 7473 | 8982 | 0 | 5243 | 37 920 |
2009 | 6527 | 5821 | 0 | 4770 | 22 154 |
2010 | 8160 | 8087 | 0 | 4583 | 29 421 |
2011 | 10 357 | 12 470 | 0 | 4918 | 45 095 |
2012 | 6953 | 7324 | 0 | 3400 | 22 059 |
Graphical representation of the descriptive statistics for CEO short-term incentives.
Market capitalisation: Research sample versus JSE. STI, short-term incentives; FP, fixed pay.
Despite the fact that only the 21 organisations of the JSE top 40 have been included in the research sample, these organisations, as illustrated in
Organisational performance measures means.
Year | Market capitalisation (ZAR) | Earnings per share (c) | Return on investment (%) | Economic value added (R ’000) | Market value added |
---|---|---|---|---|---|
2006 | 126 127 302 078 | 411 872 | 45.41 | −96 040 059 | 2.68 |
2007 | 152 428 562 410 | 372 635 | 27.22 | −55 045 568 | 2.92 |
2008 | 105 504 699 867 | 408 180 | 20.07 | 8 437 130 | 1.92 |
2009 | 143 840 910 288 | 277 988 | 21.37 | −74 430 824 | 1.99 |
2010 | 161 080 579 054 | 351 671 | 19.95 | −49 226 725 | 2.07 |
2011 | 158 206 364 568 | 436 858 | 23.08 | 4 623 051 | 1.98 |
2012 | 189 816 637 829 | 257 915 | 16.91 | −50 811 025 | 2.03 |
Organisational performance measures standard deviations.
Year | Market capitalisation (ZAR) | Earnings per share (c) | Return on investment (%) | Economic value added (R ’000) | Market value added |
---|---|---|---|---|---|
2006 | 117 876 561 428 | 918 429 | 56.88 | 486 081 146 | 2.00 |
2007 | 147 782 173 297 | 871 015 | 23.38 | 360 619 615 | 2.90 |
2008 | 101 376 853 276 | 929 707 | 39.34 | 214 398 037 | 1.11 |
2009 | 138 000 304 554 | 648 033 | 30.31 | 338 667 551 | 1.60 |
2010 | 151 136 297 119 | 915 648 | 19.79 | 383 469 055 | 1.34 |
2011 | 141 199 051 489 | 1 155 145 | 22.68 | 228 620 487 | 1.37 |
2012 | 173 261 507 601 | 552 202 | 17.97 | 427 188 317 | 1.53 |
The primary objective of this research was to determine the relationship between CEO remuneration and the financial performance of an organisation. As a result, the first research question investigated whether any structural changes occurred with regard to the mix of remuneration components CEOs received after the 2008 financial crisis.
CEO fixed pay (a) and short-term incentive (b) means and percentage changes.
Short-term incentive/fixed pay ratios (2006–2012).
Fixed pay – short term incentive mix (2006–2012).
Correlation analysis: Fixed pay and organisational performance measures.
Correlation analysis: Fixed pay and organisational performance measures.
Year | Market capitalisation | Earnings per share | Return on investment | Economic value added | Market value added | |||||
---|---|---|---|---|---|---|---|---|---|---|
ZAR | ZAR | ZAR | ZAR | ZAR | ||||||
2006 | 0.7709 | 4.310E-05 | 0.4580 | 0.0368 | −0.2607 | 0.2538 | −0.2224 | 0.3325 | −0.2619 | 0.2514 |
2007 | 0.8586 | 6.336E-07 | 0.8462 | 0.0000 | −0.0795 | 0.7319 | 0.0104 | 0.9644 | −0.2049 | 0.3729 |
2008 | 0.6171 | 2.883E-03 | 0.6120 | 0.0032 | −0.1426 | 0.5374 | −0.0332 | 0.8863 | −0.2193 | 0.3396 |
2009 | 0.7973 | 1.507E-05 | 0.6145 | 0.0030 | −0.1830 | 0.4271 | −0.2922 | 0.1987 | −0.3106 | 0.1706 |
2010 | 0.8226 | 4.721E-06 | 0.7176 | 0.0002 | −0.1760 | 0.4454 | −0.0208 | 0.9286 | −0.2985 | 0.1887 |
2011 | 0.8328 | 2.804E-06 | 0.6571 | 0.0012 | −0.1558 | 0.5002 | 0.3445 | 0.1262 | −0.2810 | 0.2172 |
2012 | 0.8128 | 7.534E-06 | 0.8815 | 0.0000 | −0.1015 | 0.6616 | 0.0457 | 0.8439 | −0.2655 | 0.2448 |
Correlation analysis: Short-term incentives and organisational performance measures.
Correlation analysis: Fixed pay and short-term incentives.
Year | Market capitalisation | Earnings per share | Return on investment | Economic value added | Market value added | |||||
---|---|---|---|---|---|---|---|---|---|---|
ZAR | ZAR | ZAR | ZAR | ZAR | ||||||
2006 | 0.4047 | 0.0688 | 0.5530 | 0.0093 | −0.1180 | 0.6106 | 0.1165 | 0.6150 | −0.3519 | 0.1177 |
2007 | 0.3533 | 0.1162 | 0.5979 | 0.0042 | −0.1407 | 0.5429 | 0.0704 | 0.7616 | −0.2581 | 0.2587 |
2008 | 0.2452 | 0.2841 | 0.2493 | 0.2757 | −0.0049 | 0.9830 | 0.1925 | 0.4032 | −0.1856 | 0.4204 |
2009 | 0.1800 | 0.4350 | 0.1959 | 0.3947 | −0.3460 | 0.1244 | −0.1660 | 0.4720 | −0.3202 | 0.1571 |
2010 | 0.3484 | 0.1217 | 0.2421 | 0.2904 | −0.2113 | 0.3578 | −0.0704 | 0.7618 | −0.1859 | 0.4197 |
2011 | 0.4202 | 0.0579 | 0.2317 | 0.3122 | −0.1428 | 0.5370 | 0.0505 | 0.8280 | −0.0751 | 0.7463 |
2012 | 0.3878 | 0.0824 | 0.1714 | 0.4575 | −0.1953 | 0.3963 | −0.2598 | 0.2554 | −0.2003 | 0.3839 |
Due to the extreme relative nature of outliers, especially for STIs paid to CEOs by organisations, the medians for CEOs remuneration were also considered in the correlation analysis. Medians are not influenced by outliers compared to means and in most cases when data sets have outliers, reporting the median as the central tendency of the data often gives a better ‘typical’ data value than the mean (Anderson, Sweeney, Williams, Freeman & Shoesmith,
Correlation coefficients results: Means and medians.
Means and medians correlation coefficients (
The primary objective of this research study was to investigate the relationship between CEO remuneration and organisation performance in South Africa between 2006 and 2012 and to determine whether the two constructs were positively correlated. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
The first research question investigated was whether there were any structural changes to the total remuneration received by CEOs as a result of the global financial crisis. The implementation of the
The research findings strongly suggest that some structural changes to the total remuneration of CEOs occurred after 2008. The main structural change was an increase in FP accompanied by a decrease in STIs. These findings can be supported further by the calculated means and medians of the STI to FP ratios. The trend lines for the means and medians show that there was an upward movement between 2006 and 2007, which was followed by a downward movement in 2008. The general regression equations for the STI:FP ratios have the following negative slopes: βmean = −0.0701 (
It can be seen that CEOs are becoming more innovative as they are noticeably moving away from focusing on STIs, which are categorised as performance-related elements of remuneration. As a result, CEOs are focusing more on FP rather than STIs. This change in focus results in the
The second research question was aimed at determining the correlation between CEO total remuneration and organisation performance. Corporate governance and economic theories of remuneration largely suggest that ‘organisational performance should affect an executive's remuneration to the extent that it serves as a proxy for unobservable managerial effort or productivity’ (Murphy,
Results indicate that FP was found to be weakly and inversely correlated to ROE during the research study period between 2006 and 2012 (
Results indicate that STIs had an inverse relationship with ROE and the strength of the relationship was weak to moderate (
The most stable of the findings was the direct relationship of CEO total remuneration with MC and EPS; another was the inverse relationship with ROE and MVA.
The findings of the relationship between CEO total remuneration and ROE support those found by Van Blerck (
MVA represents value created whilst ROE measures an organisation's profitability by revealing how much profit an organisation generates with the money shareholders have invested. The inverse relationship found between these performance measures and CEO total remuneration is of major concern, especially as value creation occurs during global financial difficulties when executives adopt a risk-averse orientation.
The relationship between CEO total remuneration and EVA tended to change direction depending on the global economic standings. When the global economy was experiencing uncertainty or difficulties (e.g. 2008 global financial crisis and August 2011 stock market fall), EVA was found to be leaning towards being more directly related to CEO total remuneration. When the global economy was performing well, EVA was found to be leaning towards being more inversely related to CEO total remuneration as organisations earned more profits and allocated less to the cost of financing their respective organisations’ capital.
The correlation findings with regard to EVA suggest that CEOs, during economic certainty, engage more in empire building, taking investment projects that may not be profitable for the shareholder, but are undertaken purely to increase the size of the organisation. Similar findings were made by Hope and Thomas (
The average FP had a direct relationship with MC and EVA over the 7-year research period and the relationships were found to be strong and moderate. Results also indicate that average FP was inversely correlated to EPS, ROE and MVA and the respective relationships were moderate, strong and moderate.
Except for EVA, the relationship between STIs and all organisation financial performance measures were directly opposite to those found for FP. STIs were found to be moderately inversely related to MC and directly related to the other four organisation financial performance measures. The relative relationship strengths of STIs with the EPS, ROE, EVA and MVA were found to be weak, strong, moderate and strong.
Shaw and Zhang (
The irony is that whilst the STI link with organisation financial performance measures (i.e. accounting-based measures) exists, the FP link with organisation performance measures continues to be eroded. Executives are avoiding STIs and paying greater attention to FP to reduce the impact of performance-related elements in determining their remuneration.
The above findings strongly suggest that failure to reward or punish executives for either superior or poor performance will continue to erode the link between CEO total remuneration and financial organisation performance. The optimal contracting approach does not appear to be working and the managerial power approach seems dominant, that is executive remuneration is not being used as a potential instrument for addressing agency problems, but has become part of the agency problem itself (Frydman & Jenter,
The long-term impact of this, according to Jensen and Murphy (
This research suggests that a stronger test of the pay-performance link and the power of incentive design is required in order to ensure that executives are rewarded or punished for performance. The question on how executives are paid also needs to be considered. The research identifies the need for a robust and valid CEO pay-performance model to ensure consistency with the agency notion that top executives are rewarded for increases in shareholder wealth.
It is suggested that boards and remuneration committees need to pay more attention to the different performance measures available in assessing CEO performance. More attention should also be paid to reducing the subversive behaviour of CEOs, which serves to reduce the efficacy of the
This research only investigated the specific relationship between performance and pay and did not include information on the causal factors influencing CEO remuneration and the financial performance of the organisations. In addition, the size of the organisations studied, and the possible effect that this would have on the total remuneration of the CEO, was deemed to be beyond the scope of this research. The fact that all the organisations selected were large organisations could address the problem of organisation size as a threat to the validity of the research; however, it is suggested that further research should be conducted to see if the same findings apply to small and medium organisations.
In theory, efficient remuneration contracts will be designed well enough to link executive remuneration with organisation performance and provide strong incentives for executives to operate organisations in the best interest of the shareholders. Additionally, the
Based on the findings of the current research, it can be concluded that there have been structural changes after the 2008 global financial crisis with regard to total remuneration received by CEOs; these structural changes were further amplified after the August 2011 stock market fall. The findings of the current research indicate that these changes were deliberate as CEO were focusing more on fixed pay and moving away from performance-related short-term incentives, thus creating a disconnect between what CEOs are being paid and the performance of organisations.
More attention needs to be paid to the different behaviours of top executives, especially CEOs, in making the
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
M.B. (University of Johannesburg) was the project leader and academic supervisor and also contributed to writing the manuscript. M.F.M. (University of Pretoria) was responsible for project design, field work and writing up the research.