Abstract:
ORIENTATION : The level of chief executive officer (CEO) compensation and its relationship
with organisational performance has generated considerable interest worldwide. In light of
compromised mining productivity as a result of the recent labour unrest in South Africa, some
commentators have questioned the justification of certain CEO compensation in the country’s
mining industry.
RESEARCH PURPOSE : The primary purpose of this study was to describe the relationship between
CEO compensation and organisational performance in the South African mining industry.
MOTIVATION FOR THE STUDY : A deeper understanding of the relationship would enhance
knowledge when developing optimal CEO reward systems to ensure sustainability of the
mining industry within the South African context.
RESEARCH DESIGN, APPROACH AND METHOD : The research was a quantitative, archival study
involving 30 mining companies over a 5-year period. The statistical analysis techniques used
in the study included analysis of normality variance and multivariate regression.
MAIN FINDINGS : The main finding of the research was that there was a moderate to strong
relationship between CEO compensation and organisational performance in the South African
mining industry. However, operating expenses have progressively increased, putting
performance under pressure. Furthermore, it was also found that organisation size plays an influential role in CEO compensation levels.
PRACTICAL/MANAGERIAL IMPLICATIONS : While the CEO compensation appears to be generally
aligned with the organisational performance, the findings suggest that boards of directors
should focus on structuring reward systems more optimally to mitigate managerial rent
seeking in large companies and unsustainability in smaller companies.
CONTRIBUTION /VALUE-ADD : This study has contributed to the body of existing knowledge on
executive pay for performance in the context of the South African mining industry. In addition,
the study has demonstrated that the other measures related to non-performance need to be
considered in executive compensation design. The study adds practical value in contributing
to information for engagements with stakeholders such as organised labour on executive pay.