Abstract
This survey investigated the relationship between executive compensation and corporate financial performance. It hypothesized that a company can utilize its pay system to direct executives’ efforts toward its strategic business objectives, and thereby contributes to higher levels of corporate financial performance. The survey data consisted of a secondary and non-probabilistic sample of 79 Brazilian companies. In order to operationalize the independent compensation variable, the author used monthly salary, variable salary and three indices that were created for this survey – benefits, career and development. These indices measure the access to benefits, mechanisms for stimulating and supporting careers and mechanisms to encourage education and professional development that companies offer their directors, vice presidents and chief executive officers. The compensation data is from fiscal year 2008. For the financial performance variable, three accounting indicators were used – sales growth, return on equity (ROE) and return on assets (ROA) – for fiscal year 2008. Size and industry were used as control variables. The results of multiple regression analysis do not support the hypothesis that there is a positive and significant relationship between executive compensation and corporate financial performance.
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