Determinants of CEO remuneration, for JSE listed financial service organisations

Abstract

Research Background: Years of academic research has resulted in an inconclusive view on which factors determine a CEOs remuneration. As such, the quantum of the wage premium paid to CEOs, relative to employees at all other levels, has been a contentious topic that has been discussed for decades, with research on the topic dating back to the 1980s. In the late 2000s, the topic resurfaced in the media, after CEOs of multinational corporations had been linked to the outcomes of various scandals. And evidence showed that there was a positive link between the risky actions taken by CEOs, incentivised by their remuneration structure, which contributed to the financial crisis of 2008. Research Purpose and Design: The purpose of this study was to determine whether organisation size and organisation performance were determinants of CEO remuneration, and to what degree. The study focussed on JSE listed organisations in the financial services sector. And the sample was made up of the top 15 organisations, based on their market capitalisation. Data was collected over a five-year period, spanning 2015-2019. Main Findings: The main findings of this research indicate that organisation size is not a significant determinant of CEO remuneration, for financial services organisations, listed on the JSE. In contrast, organisation performance was found to be a significant determinant of CEO remuneration. These findings add to the body of knowledge on this topic and create an evidence base, showing that the remuneration packages set by these organisations, are performance driven.