Director Remuneration Research Articles

Can firm profitability, firm sustainability, and firm size influence director remuneration in public listed companies?

A director of a company shall exercise reasonable care, skill, and diligence with the knowledge, skill, and experience that may reasonably be expected of a director and which the director in fact has. In view of this, there is a need to find a balance between remunerating directors for their challenging responsibilities and attracting and retaining them, while also justifying the pay package to shareholders, which remains difficult for many listed companies. Therefore, it is important to understand the factors that influence directors’ remuneration in public listed companies. This study aims to address this issue by choosing three firm characteristics namely, firm profitability, firm sustainability, and firm size. This study relied on content analysis on public listed companies in Malaysia. This study utilised 291 observations over a period of 3 years, from 2019 to 2021. The statistical analysis was performed using panel data analysis. This study shows that firm sustainability positively and significantly influences director remuneration in public listed companies. On the other hand, this study shows that firm profitability and firm size negatively influence director remuneration, although the relationship is not significant. The findings of this study implicate that firm sustainability is an important factor in determining director remuneration in public listed companies. The findings of this study contribute to the literature on the factors that contribute to director remuneration in public listed companies and are able to justify why these directors are remunerated differently.

Impact Of Corporate Governance Mechanism On Capital Structure Decision On Non-Financial Sectors Of Emerging Countries

The study aimed to evaluate the effect of Corporate Governance Dynamic on Leverage on non-financial sectors of emerging countries (Pakistan, India, and Bangladesh ) during the study period of 2014 to 2023. The nature of the study is quantitative and secondary therefore data has been extracted from the respective websites of the companies and stock exchange from the pharmaceutical, cement, and food industries. Moreover, the Random effect model was used to on the bases of diagnostic test to identify the cause and effect. The findings of the study reveal that director remuneration, and board education in Pakistan showed positive and significant effects but Board size, board experience showed significant and negative effects on the capital structure decision. While board diversity, firm size found an insignificant association with leverage in Pakistan. For firm size showed an insignificant effect but board size, direct remuneration, and board education showed a negative and significant effect on leverage while board experience, board diversity was a positive and significant effect on leverage. Moreover, in India, board experience, board diversity, and board education was a significant but negative effect on leverage but board size, direct remuneration, firm size showed a positive and significant effect on the leverage of non-financial firms.

The Effect of Remuneration of Directors and Commissioners, Enterprise Risk Management on Financial Distress with Firm Life Cycle as Moderation

This study aims to determine the effect of Remuneration of Directors and Commissioners, Enterprise Risk Management on Financial Distress with Firm Life Cycle as moderation. This study uses secondary data obtained from the company's financial statements and annual reports. The amount of data in this research population is 150 data from retail companies listed on the Indonesia Stock Exchange (IDX) for the period 2017 - 2022. The analysis technique used in this research is moderated linear regression analysis which is processed using SPSS version 27. The results of this study are enterprise risk management has a negative effect on financial distress, firm life cycle strengthens the relationship between remuneration of directors and commissioners on financial distress, remuneration of directors and commissioners has no effect on reducing the level of financial distress, firm life cycle has no effect on the relationship between enterprise risk management and financial distress.

Effects of corporate governance on organizational effectiveness in some selected deposit money banks in makurdi metropolis, Nigeria

The effectiveness of a few Makurdi Metropolis deposit money banks was examined in this study in relation to corporate governance. Finding out how board size influences the organizational effectiveness of a few particular deposit banks in Makurdi was one of the study's main objectives. The study focused on the five hundred and fifty (550) workers of a few carefully chosen deposit money institutions. 220 persons made up the sample size, which was determined using the Taro Yamane formula. First-hand information was used in the study. A questionnaire was the main instrument used to collect data. The statistical packages for social sciences (SPSS 21) were employed to evaluate the developed hypotheses, and regression and correlation analysis were the techniques used to analyze the data. The unprocessed data from the original source was displayed using tables and simple percentages. The study found that deposit money banks with beta coefficients of .247.197 perform significantly better when they have a diverse, large, and independent board, as well as when director compensation is high, 022 and 205. As per the beta coefficient, the board size had the highest beta values, measuring .247. In conclusion, the study discovered that certain deposit money institutions in Makurdi metropolis benefited from board diversity, board size, and director remuneration.

Relationship Between Board Characteristics and Level of Corporate Disclosure Among Listed Companies in Tanzania

This paper examined the relationship between board characteristics and Level of corporate Disclosure (LCD) among Tanzanian listed companies. Relationships between board size, board independence; directors’ remuneration and LCD were examined. The 105 firm-year observations for 21 listed companies in Tanzania from 2016 to 2020 were used. The study used the agency theory. An explanatory research design was employed. Balanced panel data for analysis were gathered using a survey method. Data were analyzed using descriptive and inferential statistics. Regression analysis was used in testing hypotheses. Findings showed that board size, board independence, directors’ remuneration were positively related to LCD. It was recommended that listed companies should appoint a higher proportion of independent directors to their boards. Independent directors can provide impartial oversight and are more likely to prioritize transparency and disclosure. Companies are adviced to optimize board size aim for a board size that is appropriate for their specific needs and industry. Moreover, listed companies should adopt transparent and fair director remuneration practices. This includes disclosing the structure of director compensation, including; salaries, bonuses, stock options, and other benefits. Policymakers and regulators should consider implementing or strengthening regulations related to board composition, independence, and disclosure practices.

The relationship between director’s compensation and audit fee: Empirical evidence from developing countries

The present study investigates the correlation between director remuneration and audit fees within the context of a corporation operating in a developing nation. Additionally, this study investigates whether the extent of national consumption strengthens the association between director compensation and audit fees. This study employed the Ordinary Least Square (OLS) method to analyses a dataset consisting of 3,417 samples of non-financial firm data reported on the stock exchanges of Indonesia and Malaysia. The observation period for this study spanned from 2015 to 2019. The findings of this study indicate a substantial positive relationship between director salaries and audit fees in both countries. Furthermore, the evidence shows that the level of household consumption in a country will increase because of the positive relationship between director compensation and audit fees. In addition, CEOs and CFOs who have experience working as auditors carry a more negligible risk for the company. Meanwhile, directors' overcompensation will pose a greater risk for the company. This study is robust based on sensitivity testing using Coarsened Exact Matching (CEM) and Heckman regression. In general, the amount of compensation paid to the CEO shows the company's financial capacity, which reflects the company's liquidity and asset capabilities, which will be read as risk. Furthermore, the distinctiveness of the governance systems in these two countries, as observed in our sample, demonstrates a consistent outcome.

The Influences of Director’s Remuneration, Earnings Management and Ownership Structure on Company Performance: Before and During the Covid-19 Pandemic

Company performance is a measure of company management's achievement in utilizing company’s financial resources. Besides showing the effectiveness of asset management, good performance reflects stable profitability. Covid-19 pandemic has decreased the revenues gained by companies of various sectors, resulting in lower company performance. To maintain their sustainability, some internal policies were implemented, by taking into account some factors that can affect company performance which include remuneration of directors, earnings management, managerial ownership, and institutional ownership. Eight transportation companies listed on the Indonesia Stock Exchange for the 2018-2021 period were purposively selected as samples based on the predetermined criteria. 32 observations were performed to investigate the influences of director’s remuneration, earnings management, managerial ownership and institutional ownership on company performance. After that, the gaps in company performance before and during the Covid-19 pandemic were also analyzed. The results showed that director’s remuneration negatively affected the company performance. Furthermore, earnings management and managerial ownership have a positive effect on company performance, and institutional ownership has no effect on company performance.

Antecedents of AGM Shareholder Activism in Malaysian Public Listed Companies and the Role of MSWG Activism as a Moderator

Shareholder activism and awareness of their rights at Annual General Meetings (AGMs) is one of the most contentious problems related to corporate governance. This study examines the relationship between company size, performance, directors' remuneration, and AGM shareholder activism. Using financial reports year 2021, stratified random sampling of 256 Bursa Malaysia Main Market listed companies was adopted. The Bursa Malaysia website provided all the annual reports and the AGM minutes. Findings reveal no correlation between company size, performance, director remuneration, and AGM shareholder activism. The study also found that MSWG activism does not moderate the association between these variables.

The relationship between corporate governance and financial performance in the Islamic and conventional banking industries: a Malaysian evidence

Purpose This study aims to investigate the relationship between corporate governance characteristics and the financial performance of both Islamic and conventional banks in the context of an emerging market, i.e. Malaysia. Design/methodology/approach This study includes 300 bank-year observations from Islamic and conventional banks over the period 2010–2021. The dynamic panel model (generalized method of moments [GMM]) was considered the primary estimation model that solves simultaneity, endogeneity and omitted variable problems as most governance variables are endogenous by nature. Hence, static models are considered biased after conducting the DWH test of endogeneity, and considering dynamic panel GMM is valid proven by Sargan and Hensen and first-order (ARI) and second-order (ARII) tests. Findings Based on the regression results, the authors discovered that board size, female participation in the board and director remuneration have a significant positive impact on bank performance, whereas board meetings have a significant negative impact. Furthermore, the board governance structure of commercial banks is found to be more passive than that of Islamic banks. Practical implications The study’s findings added a new dimension to governance research, which could be a valuable source of knowledge for policymakers, investors and regulators looking to improve existing governance mechanisms for better performance of conventional and Islamic banks. Originality/value The goal of this study is to add to the existing literature by focusing on the impact of female board participation and other board governance mechanisms in both conventional and Islamic banks on bank performance.

The composition of the remuneration committee and the vertical pay gap: the role of proprietary directors in Spain

PurposeThis study investigates whether the proportion of proprietary directors (blockholders or their representatives) on the board's remuneration committee influences vertical pay inequality in Spanish listed companies and whether this relationship can be conditioned by the concentration of ownership.Design/methodology/approachThe sample contains information on the individual compensation of 1048 directors of 57 Spanish listed firms during the period 2013–2018 making up an unbalanced panel with 3565 observations. Panel data regressions are used to study how the presence of proprietary directors on the remuneration committee influences the remuneration of directors, focusing not on their absolute remuneration levels, but rather on their relationship to the average remuneration of the organization's employees (as a measure of vertical pay inequality within the company). The authors also investigate whether this relationship is conditioned by firm ownership concentration.FindingsThe results indicate that the presence of proprietary directors on the remuneration committee acts as a mechanism to reduce vertical pay inequality, even in the context of high ownership concentration.Originality/valueUnlike the majority of previous research dedicated to the independence of the remuneration committee, this study focuses on the role played by proprietary directors. The results help elucidate the importance of proprietary directors to properly monitor and restrain directors' compensation in contexts of high ownership concentration.

Impact of directors’ remuneration on banks’ performance: Evidence in the US banking system

This paper explores the relationship between board director compensation and bank performance for the period 1999–2021, considering the US banking system. The literature in this area with reference to financial companies and banks is poorly developed and leads to mixed results. Furthermore, the studies have mainly focused on the remuneration of the chief executive officer (CEO), neglecting that of the board members (Minnick et al., 2011; Khumalo & Masenge, 2015; Iskandrani et al., 2018). The scientific analysis methodology adopted is based on the analysis of panel data. Firstly, the results of the data analysis make it possible to highlight the existence of a significant link between the remuneration policies adopted by banks concerning the corporate results obtained in terms of profitability. Secondly, the results show differences, in terms of impact on banking performance, between the remuneration of chief executive officers and the remuneration of directors. The results of this study can help banks identify best practices for bank management as well as provide useful insights to different categories of stakeholders, especially the bank regulators and supervisors

Determinants of Director Remuneration: Monitoring Human Capital and Social Embeddedness

The determinants of director compensation have been studied across the theoretical spectrum with varying findings. Agency theory suggests that monitoring human capital enhances the ability of the individuals to be effective monitors and should be associated with higher director compensation. At the same time, social embeddedness impedes the ability to monitor, and it should be associated with lower director compensation. In contrast, behavioral theory of corporate governance suggests ingratiating behavior and social embeddedness of directors increases their likelihood of higher value, and thus it should lead to higher director compensation. We attempt to reconcile these contradictory predictions of the agency theory and behavioral theory of the firm. We examine the same through the labor market for directors in India using a unique longitudinal dataset of director appointments and compensation in India over 2007-2016. We also exploit a natural experiment brought about by the implementation of the significant corporate governance reforms (Companies Act of India, 2013) to test the labor market norms posited by agency theory versus the behavioral theory of the firm. The finding of our study indicates the importance of monitoring human capital and social embeddedness as they positively affect directors' compensation. Our results also highlight that in emerging market contexts marked by the presence of institutional voids, when the implementation of corporate governance reform increases the risks for individual directors on account of corporate misconduct, they respond by optimizing their structural positions in the interlock network by increasing their reach but reducing their influence/salience in the network.

The Influence of Corporate Governance Internal Mechanisms and Directors' Remuneration on Performance of the Company (The Case of Banking Industries in Indonesia)

This research was conducted with the point of knowing the impact of the corporate governance internal mechanism and the remuneration of directors on performance of the company. This research focuses on the internal mechanism consisting of the board of directors’ size, internal directors, external directors, Audit Committee, Nomination and Remuneration Committee, board meeting frequency, and ownership structure. Corporate performance consists of Return on Assets (ROA) utilized to measure financial performance while Price to Book Value (PBV) is utilized to measure market performance. This research data is derived from secondary data and is sourced from the official annual report of the company. The population used in this survey was from a banking company listed on the Indonesia Stock Exchange (IDX) between 2016 and 2020. This research used purposive sampling technique and obtained a sample of 38 companies. The analysis in this study uses a panel data regression model with the help of the EViews program. The results showed that the Audit Committee had a positive and significant influence on ROA but had no influence on PBV. The board meeting frequency has no influence on ROA, but this variable has a negative and significant influence on PBV. Meanwhile, the size of the board of directors, internal directors, external directors, Nomination and Remuneration Committee, ownership structure, and remuneration of directors have no influence on ROA and PBV.

Application of text mining to the analysis of climate-related disclosures

In this article we apply text-mining techniques to analyse the TCFD recommendations on climate-related disclosures of the 12 significant Spanish financial institutions and of the companies comprising the IBEX11The IBEX 35 is a Spanish stock index that measures the behavior of the 35 most negotiated companies within the four Spanish stock exchanges (Madrid, Barcelona, Bilbao and Valencia). The study includes the 35 companies except one (ArcelorMittal), which did not have enough reports available for the period of analysis. 35 stock market index using publicly available corporate reports from 2014 until 2020.In our analysis, applying our domain knowledge, first we create a taxonomy of concepts present in disclosures associated with each of the four areas described in the TCFD recommendations. This taxonomy is then linked together by a set of rules in query form of selected concepts. The queries are crafted so that they identify the excerpts most likely to relate to each of the TCFD's 11 recommended disclosures. By applying these rules we estimate a TCFD compliance index for each of the four main areas for the period 2014–2020 using corporate reports in Spanish. We also describe some challenges in analysing climate-related disclosures. The index gives an overview of the evolution of the level of climate-related financial disclosures present in the corporate reports of the Spanish banking sector compared to the sectors represented in the IBEX 35 index. The results indicate that the quantity of climate-related disclosures reported is growing each year. Besides, our study also suggests that some disclosures are only present in reports different than annual and ESG reports, such as Pillar 3 reports in the case of the banking sector or reports on remuneration of directors in the case of publicly traded companies.

Insider perspectives on director remuneration governance deliberations

PurposeCompanies around the globe increasingly receive immense shareholder scrutiny due to perceivably excessive executive director remuneration. The debate in South Africa intensifies due to severe pay inequality. The authors thus accounted for the perspectives of asset managers and listed financial services companies in South Africa pertaining to the impact of voting and engagement on director pay policies and practices.Design/methodology/approachSemi-structured interviews were conducted with selected asset managers, chief executive officers, chief financial officers and remuneration committee members of listed financial services companies to gauge their views on the impact of shareholder activism endeavours on remuneration governance. The qualitative data was analysed by conducting thematic analysis.FindingsMost of the asset managers and financial services representatives preferred proactive, private engagement on pay concerns, given the impact thereof on voting outcomes, and ultimately director remuneration practices and policies. Independent remuneration committees have a prominent role in facilitating engagements with investors to ensure fair remuneration.Research limitations/implicationsThe consequences should be clearer if organisations receive substantial votes against their pay policies and implementation reports. South African regulators can consider the “two-strikes” rule to ensure that action is taken in response to shareholder voting on director remuneration matters.Originality/valueRepresentatives of asset managers and listed financial services investee companies offered valuable insights on remuneration governance deliberations in an emerging market. This in-depth analysis highlights the importance of proactive engagement to ensure that corporate leaders are paid fairly.

Impact of board attributes on stock liquidity: evidence from Pakistani panel data

PurposeThis study investigates the impact of board characteristics on the stock liquidity of Pakistani listed non-financial firms for the period 2007–2016.Design/methodology/approachThe study uses fixed-effects regression model on a sample of 170 non-financial firms listed on the Pakistan Stock Exchange for regressing the impact of board attributes on stock liquidity while for addressing the endogeneity two-stage least-square (2SLS) and lagged structure models are used.FindingsThe study finds that board meetings (BM), directors' attendance (DAT) at BM, board gender diversity, the number of board subcommittees (NBC) and board foreign diversity (BFD) positively affect stock liquidity. Checking the robustness through 2SLS and lagged structure models, it is suggested that the findings are robust to the problem of endogeneity.Practical implicationsOutcomes of the study signify the role of novel board attributes in improving the stock liquidity which has implications for investors, the board of directors and policymakers.Originality/valueThe authors are the first to investigate the impact of novel board attributes–BFD, directors' remuneration (DR), DAT and the number of board sub-committees on stock liquidity. Up to the best of researchers' knowledge, these board attributes have never been examined before in relation to stock liquidity.

Directors’ compensation, ownership concentration and the value of the firm: evidence from an emerging market

We examine the association between directors’ compensation and firm value and investigate whether ownership concentration moderates this relationship by utilising a sample of Malaysian public-listed firms for the period from 2004 to 2014. Using fixed effect regression, we find that the remuneration of executive and non-executive directors is positively related to firm value. However, there is no conclusive evidence on the moderating effect of ownership concentration on the relationship between executive directors’ and non-executive directors’ compensation and firm value. Our findings indicate that executive and non-executive directors’ compensation packages should be linked to firm performance. The implication of this research addresses one of the key issues in corporate finance i.e., whether it is worth compensating directors in emerging markets or not.

The Effect of Director's Remuneration, Audit Fee, and Director's Expertise on Earnings Management with Sales Growth as Moderating Variable

The purpose of this study is to examine the factors that influence earnings management practices in state-owned companies and their subsidiaries listed on the Indonesia Stock Exchange . The sample s used in this study were 9 state-owned companies and subsidiaries listed on the IDX for the period 2013-2019, with a total of 63 samples. The analytical tool used to analyze the hypothesis is Eviews 11.0. The results showed that the expertise of the director has a significant positive effect on earnings management. However, director's remuneration and audit fee have no effect on earnings management. Sales growth proved unable to moderate the relationship of director remuneration, audit fees and director's expertise to earnings management. This research has important implications for building informal control over an action that will be taken by the directors through the perspective of religiosity in influencing the behavior and decisions that will be taken by the directors.

Do employees' salaries and board of director's remuneration impact gold demand?: An empirical study

This study discuss the relation between gold demands and employees' salaries. It also examines the linkages between the board of director's remuneration and gold demands. We investigate the association between two forms of gold, i.e., gold jewellery and gold bars & coins between both categories of incomes. There are two sources of income, one of them is from organized sources of income, and another is from unorganized sources of income. However, approximately 92% of the workforce falls under the unorganized sectors, and 8% fall under the organized sectors. Our study is based on the only income of corporate sectors (i.e. formal sectors) which fall under the organized income group. In this study, the demand function is investigated in terms of corporate incomes and the price of the gold. This study provides analytical and empirical linkages between gold demands and corporate income during 2010–2019. It is an unbalanced panel data with 386,312 quarterly board of directors' remuneration from 2424 listed firms. We take quarterly employees' salaries paid by 2223 listed firms to their employees. We test the unit root test to check the stationarity of data. This paper uses the Two-Stage Least Squares Estimation and Error Correction Models to test the research hypotheses. We find a positive relation between gold jewellery and income and no significant association between the gold bars & coins and income.

Directors’ remuneration, banks’ specific and board characteristics: the case of Indian listed banks

Directors’ remuneration, banks’ specific and board characteristics: the case of Indian listed banks