Chief Executive Officer remuneration and financial performance of Australian and South African publicly listed companies

Abstract

Executive remuneration has been discussed extensively in both academia and industry, causing much disagreement. This dilemma is not exclusive to South Africa as executive remuneration has been central in a number of company scandals globally and considered a critical contributor to the global financial crisis. The purpose of this research was to identify and compare the significant CEO pay-performance relationships between the developed and developing economies of Australian and South African publicly listed companies respectively. International comparisons of CEO pay-performance relationships are scarce, with the majority of studies comprising of only single-country analyses. Historical inconsistent remuneration practices of publicly listed companies have resulted in varied effects on company performance and shareholder value creation. CEOs are witnessed receiving large remuneration packages while delivering little shareholder value. Increased public attention has called for stringent corporate governance measures for CEO remunerations schemes. The research study was conducted as an empirical explanatory quantitative study to further understand the relationship between CEO remuneration practices and the financial performance of Australian and South African publicly listed companies. The overarching principal finding of the study was the confirmation of the difference in the significant pay-performance relationships between Australian and South African publicly listed companies, with results indicating that only a negligible portion of the variance in CEO remuneration can be attributed to financial performance measures. The increase in the globally mobility of CEOs has added an additional level of complexity to the pay-performance relationship. Contributing to the field of human resource management and remuneration this study builds on the understanding of CEO pay-performance relationship to maximise shareholder value creation and retain talented CEOs.