The use of share incentive schemes as part of the remuneration structure for the head of internal audit or the
Chief Audit Executive (CAE) is one mechanism available to a company to incentivise its senior executives
and to ensure they add value to the company they manage. This can however lead to challenges as internal
auditors have always had to fulfil two contradictory roles: being an employee in a company and being an
objective person involved in rendering independent assurance services for the same company. It is, therefore,
important for internal auditors to strike the correct balance that ensures they are perceived as sufficiently
independent to achieve their objectives in terms of the annual internal audit plan. Care must also be taken to
ensure that the share incentives do not have a negative influence on the level (or perceived level) of
independence and objectivity the CAE demonstrates.
This is the first South African study to investigate the use of share incentive schemes for CAEs. This study
used structured interviews in a multiple case study approach to identify the views of the chairpersons of audit
committees (CACs) on the use of share incentive schemes for their CAEs. The study found that share
incentive schemes were used to incentivise CAEs mostly over the medium term. The study also found that
although the CACs had little oversight over the remuneration of the CAEs, they nevertheless did consider the
use of share incentive schemes to be an acceptable remuneration mechanism.