Abstract
Orientation: Concerns about exorbitant executive compensation are making headlines, because executives receive lucrative packages despite state-owned enterprises (SOEs) performing poorly. It appears as if chief executive officers (CEOs) are not being held accountable for the performance of the SOEs.Research purpose: The purpose of the study was to determine whether the size and the industry of an SOE had an impact on CEO compensation packages.Motivation for the study: A greater understanding of the relationship between CEO remuneration and the size and type of industry of SOEs would assist with the standardisation of CEO remuneration and linking CEO pay to SOE performance.Research approach/design and method: A multiple regression analysis on a pooled dataset of 162 panel observations was conducted over a 9-year period. Financial data of 18 SOEs were extracted from the McGregor BFA database and the annual reports of SOEs.Main findings: The findings show that the size of an SOE does not influence the total compensation of CEOs. However, larger SOEs pay larger bonuses due to these SOEs being in a stronger financial position to offer lucrative bonuses. CEO’s remuneration was aligned within certain industries.Practical/managerial implications: The findings emphasise the need to link CEO compensation with SOE performance. Standardisation in setting CEO compensation and implementing performance contracts should be considered.Contribution/value-add: The study confirms that CEO pay is not linked to performance and not justified when considering SOE size or industry.
Highlights
Concerns about exorbitant executive compensation are not new, as noises were made back in 2008 about executives receiving lucrative packages despite state-owned enterprises (SOEs) performing poorly
Research purpose: The purpose of the study was to determine whether the size and the industry of an SOE had an impact on chief executive officers (CEOs) compensation packages
This study aimed to contribute to a better understanding of CEO compensation
Summary
Concerns about exorbitant executive compensation are not new, as noises were made back in 2008 about executives receiving lucrative packages despite state-owned enterprises (SOEs) performing poorly The former Minister of Finance, Trevor Manuel, expressed the concern that excessive salaries were unjustified in the context of South Africa’s 23% unemployment rate (Theunissen, 2010). State-owned enterprises, unlike private companies, receive the greater part of their revenue from the National Treasury (tax revenue) and are primarily tasked to provide a service to the public (Bezuidenhout, Bussin, & Coetzee, 2018). It seems, as if the bulk of funding is used for compensation purposes, rather than investing in service delivery (Ngwenya & Khumalo, 2012)
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