Abstract:
South Africa’s labour policies and the growing societal calls to better explain
executive remuneration create a unique opportunity to examine the effects of race
on CEO pay. This empirical research study sought to investigate the effects of
race on the sensitivity of executive pay to corporate performance. The study aims
to contribute to the literature by providing an evidence-based approach to
understanding the effect of race on CEO remuneration. The research design was
quantitative, descriptive and longitudinal in nature, utilising validated secondary
data sources. The sample consisted of 19 black CEOs and a random sample of
45 white CEOs. All components of South African CEO remuneration studied were
found to correlate strongly with PAT (Profit after Tax) and EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortisation) and to a lesser degree
with ROE (Return on Equity) and HEPS (Headline Earnings per Share). Black and
white CEO mean remuneration was found to show no significant difference as a
result of race. A notable difference found was the higher degree of payperformance
sensitivity and variability seen within the black CEO sample. The
study showed that race does not affect the level of CEO remuneration but does
impact on pay-performance sensitivity and variability.
