Financial indicators of company performance in different industries that affect CEO remuneration in South Africa
- Authors: Bussin, Mark , Blair, Chris
- Date: 2015
- Subjects: Corporate profits - South Africa , Chief executive officers - Salaries - South Africa , Executives - Salaries - South Africa , Executive effectiveness South Africa
- Language: English
- Type: Article
- Identifier: http://hdl.handle.net/10210/226796 , uj:22940 , Citation: Bussin, M. & Blair, C. 2015. Financial indicators of company performance in different industries that affect CEO remuneration in South Africa. South African Journal of Economic and Management Sciences, 18(4):1-13. DOI: http://dx.doi.org/10.17159/2222-3436/2015/v18n4a7. , ISSN: 2222-3436
- Description: Abstract: In an attempt to address the growing gap between chief executive officer (CEO) remuneration and that of the general worker, reign in rising CEO remuneration, and justify the portion of long-term incentive pay that makes up the bulk of CEO remuneration, shareholders and other stakeholders are trying to find definitive factors that will link CEO remuneration to company performance. Finding this link has become central to all executive remuneration issues. The results of the studies linking CEO remuneration to company performance are varied and inconclusive, particularly in South Africa. The reason for this is that previous studies have not looked at whether the company performance measures chosen have definite relationships with CEO remuneration in each industry. This study investigated eleven financial indicators of company performance to determine which of them have significant and positive relationships to CEO remuneration in different industries in South Africa. 254 South African listed companies, spread over 5 industries, were analysed for the period 2008 to 2012 using panel data analysis and statistical tests. The results were conclusive, finding performance metrics that had a positive and significant relationship to CEO remuneration in 4 of the 5 industries investigated, as well as over the aggregate of all the industries.
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The relationship between executive remuneration and company performance : a study of 20 of the largest companies listed on the Johannesburg Stock Exchange Ltd.
- Authors: Resnick, Ariel A.
- Date: 2014-01-14
- Subjects: Chief executive officers - Salaries, etc. , Johannesburg Stock Exchange , Corporate profits - South Africa , Organizational effectiveness - South Africa
- Type: Thesis
- Identifier: uj:7884 , http://hdl.handle.net/10210/8775
- Description: M.Comm. (Financial Management) , Although general studies have been conducted on the agency problem, such studies have not focused on the relationship between executive remuneration and company performance. Many of the studies conducted abroad have focused on quantitative methods using regression analysis to understand the relationships between diverse financial performance measures and a variety of performance appraisal techniques. This study aims at establishing the relationship between executive remuneration and company financial performance on the basis of 20 of the largest companies listed on the Johannesburg Stock Exchange Ltd (JSE). It has been observed that JSE-listed South African companies have almost a standard governance framework for determining salary structures of CEOs and directors. Furthermore it can be seen that most performance-linked payouts for CEO's and directors are based on measurement criteria established which are based on actual performance levels achieved. For this reason, it may be concluded that short-term targets are crucial to keeping a business going, to ensure positive cash flows, manage working capital, and achieve year-on-year growth of revenues and profits. However, to ensure survival and sustainability of the business in the changing global and local environments, long-term strategies should be formulated and various steps should be taken by CEOs, supported by other executive and non-executive directors. This research focuses on short-term goals and their influence on executive remuneration for CEOs and CFOs. The performance measures selected for this study were revenues, profits, share price and net asset value. These performance measures selected are supported by the relevant academic literature. The results of this study reveal that CEOs and CFOs have received lower remuneration in the form of bonuses as a result of companies not achieving their short-term goals.
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