Executive compensation and company performance : pre- and post-Marikana uprising analysis

Abstract

BACKGROUND : Executive compensation has become a controversial topic globally. Recent and past incidents of labour unrest, including those that plagued the South African mining sector in 2012, highlighted the level of controversy on the subject. PURPOSE : The purpose of this study was to investigate the relationship between executive compensation and company performance in the mining sector of the Johannesburg Stock Exchange (JSE). METHODOLOGY : The study was quantitative in nature and used purposive sampling in selecting 28 mining companies listed on the JSE. Estimated generalised least squares (EGLS) and seemingly unrelated regression (SUR) were used to analyse unbalanced panel data spanning from 2007 to 2018. FINDINGS : The results show that there is no relationship between executive compensation and market value added (MVA), revenue growth (RG), return on assets (ROA), and return on equity (ROE) both before and after the Marikana event. In the period before the Marikana event, 2007–2012, economic value added (EVA), share price (SP) and total assets (TA) were statistically significant in explaining variability in executive compensation. However, in the post-Marikana period, 2013–2018, only the TA and earnings per share (EPS) are statistically significant in explaining the variability in executive compensation. VALUE : This study offers a practical contribution to policy makers and practitioners on pertinent performance measures that can aid in minimising agency costs when designing executive compensation plans.