The Relationship between Total Management Team (TMT) Compensation and Corporate Governance: The Case of Saudi Stock Market

Abstract

This research aims to evaluate emergent or new dimensions of corporate governance (CG) practice in the Kingdom of Saudi Arabia as demonstrated by selected companies listed in the Saudi stock exchange. The research seeks to enrich existing literature in the field for best practice and cutting-edge research applications by undertaking the tripartite processes of: (1) analyzing the firm size elasticity of total management team (TMT) compensation; (2) investigating the simultaneous relationship between TMT compensation and firm performance, controlling for the firm size and other firm-specific variables; and (3) evaluating the impact of the firm board control on TMT compensation accounting for the firm’s ownership structure, including vital policies related to board control, ownership shares, composition, membership, and other firmspecific variables. The results of this research will have important implications for both companies and policy makers, as the outcomes guide companies toward best CG practices and encourage policy makers to leverage these regulations to improved performance of the listed companies. The research outcomes will also afford guidelines on how to use the board composition and its control on TMT in the alignment of the goals of top executives with that of the owners of the firm by structuring TMT pay.