Top Management Remuneration and Firm Performance: An Exploratory Analysis (original) (raw)
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Vikalpa: The Journal for Decision Makers, 1999
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The soaring level of executive compensation has been an issue of much public as well as policy concern over decades. For an emerging economy like India, which is already characterized by income inequality and rich-poor divide, this matter assumes utmost significance. From a deeper inspection, the form rather than the level constitutes the real problem. Thus, the present study has been undertaken with an objective to study the structure of top managerial pay in the Indian context. Compensation components of top executives of 209 sample companies listed on the S&P BSE 500 Index have been studied over FY 2008-09 to 2012-13 across six industry sectors. Results of ANOVA along with post-hoc tests confirmed inter-industry differences in the pay practices of the sample companies. Moreover, extreme domination of the fixed pay component could be observed over the years. The use of more and multiple long-term incentivizing mechanisms has, therefore, been recommended. Future research can enrich the present analysis by exploring the relationship of various pay components with corporate performance measures.
An Analytical Study on Executive Compensation with a Particular Focus on Selected Indian Companies
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Executives (managers) in any organisation are the live wires. They cannot be treated as yet another employee. They play a vital role in all management functions such as planning, organisation, directing, coordinating and controlling. India is one of the third world countries with a rapid growing economy, and in particular India is endorsed to be rich in human capital. To mention a few, the world best doctors and engineers are known to be made from India. However, recent researchers on compensation have revealed that most Indian best talents they are not happy with their compensation package. Given such conditions, it became imperative to conduct an analytical study on Executive compensation with a particular focus on selected companies in India. The primary objective of this study therefore was to find out the means of compensating executives which are currently implemented within the 5 selected Indian companies; understand how executive remuneration affects their performance; ident...
An Overview of Empirical Research on CEO Pay-Firm Performance
Research Journal of Economics and Business Stuudies, 2014
In last decade or so, the level of CEO compensation in India and abroad has risen stratospherically to such height that has grabbed newspaper headlines. For example, data released by Hay Group, a global management Consultancy for the year 2011-2012 reveals that the average CEO's compensation in India crossed Rs 2 crore marks. Such high level of CEO compensation raises the obvious question whether steep rise in CEO pay has any bearing on firm performance. The present study provides an overview of empirical studies that explore the relationship between CEO compensation and company performance. The purpose of this section is to find out which methodology should be used to investigate the relationship between the remuneration of CEOs and the performance of companies.
CEO Pay and Company Financial Performance Bussin and Fhedzi SAJHRM 17 June 2015
Introduction Key focus of the study The primary challenge in the executive pay-performance relationship is finding a mutually beneficial balance between executive remuneration and organisational performance. This Orientation: The relationship between Chief Executive Officer (CEO) remuneration and organisation performance has been a topic of close scrutiny, especially since the global financial crisis. Optimal contracting relies on the premise that effective incentives will link organisation financial performance and CEO remuneration in ways that will be in the best interests of both shareholders and CEOs. Research purpose: The purpose of this research study was to investigate the relationship between CEO remuneration and organisation performance in South Africa between 2006 and 2012 and to determine whether the two constructs were positively correlated. Motivation for the study: The study provides an evidenced-based understanding of the nature of the CEO pay-performance relationship in South Africa. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
CEO pay and coy fin performance BUSSIN FHEDZI SAJHRM 17 June 2015
Introduction Key focus of the study The primary challenge in the executive pay-performance relationship is finding a mutually beneficial balance between executive remuneration and organisational performance. This Orientation: The relationship between Chief Executive Officer (CEO) remuneration and organisation performance has been a topic of close scrutiny, especially since the global financial crisis. Optimal contracting relies on the premise that effective incentives will link organisation financial performance and CEO remuneration in ways that will be in the best interests of both shareholders and CEOs. Research purpose: The purpose of this research study was to investigate the relationship between CEO remuneration and organisation performance in South Africa between 2006 and 2012 and to determine whether the two constructs were positively correlated. Motivation for the study: The study provides an evidenced-based understanding of the nature of the CEO pay-performance relationship in South Africa. Understanding this relationship is critical to finding a suitable model to structure executive remuneration that will protect shareholders from over-remunerating executives in times of economic appreciation, whilst protecting executives from being underpaid in times of economic depreciation.
Comparing Pay-Performance Relationships: An Empirical Analysis of India and UK between 2005 and 2021
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This paper investigates the empirical relationship between director remuneration and firm performance, the pay-performance relationship, in the UK and India between the years 2005 and 2021. Existing literature has suggested that firms use remuneration of directors to align interests with owners, which explains the existence of a pay-performance relationship, and also to attract the best talent. Furthermore, a host of factors have been linked with the pay- performance relationship including the size of remuneration, components of remuneration, corporate governance, and economic stability. Using a fixed effects regression model, positive pay-performance relationships were found between at least one component of director remuneration and firm performance in both India and the UK. The relationships discovered in this model can be explained by a combination of theories, namely agency and tournament, existing at different compositions across countries. Agency theory is the predominant theory explaining the pay-performance relationship in the UK whilst tournament theory better explains the results from the Indian sample group. The empirical model also established that economic crisis changes the pay-performance relationship by splitting the sample period into normal and crisis years; this found that agency theory becomes dominant in India during crisis. The findings of this paper provide a springboard for future research into pay-performance relationships across economies and the impact of crisis.
Executive Compensation vis-à-vis Firm Performance: Identifying Future Research Agenda
The level of executive compensation in India and abroad has risen stratospherically to such a height that it has made newspaper headlines. Such high level of executive compensation raises the obvious question whether steep rise in executive pay has any bearing on firm performance. While many studies have revealed either positive or negative relationship between executive compensation and firm performance, others found no relationship at all. There is a fundamental confusion as to the exact nature of executive compensation and firm performance relationship. The present paper seeks to lift the veil of confusion regarding the nature of aforesaid relationship in all its variants by identifying and exploring different areas. The authors strive to bridge the gap between confusion and clarity by assiduously analysing and examining the extant literature on the subject. We hope that our endeavour will pave the way for future researchers to break new ground in understanding true and comprehensive relationship between executive compensation and firm performance.
CEO’s Remuneration and Performance of Firm: Evidence from Emerging Economy
Journal of Social Sciences Advancement
From the perspective of an emerging market like Pakistan, this study looks into the influence of a firm’s performance over the compensation of the Chief Executive Officers (CEO). For this purpose, the sample data of 170 non-financial companies ranging from 2008 to 2018 enlisted on the Pakistan Stock Exchange is separated into groups based on firm size, ownership type (family & non-family), and levels of corporate governance so as to analyze pay-performance link. Performance is assessed using return on equity, return on assets, and Tobin's Q, along with firm size, debt ratio, and stock beta serving as the control variables. The results of the study are determined by the Fixed Effect Model and Dynamic GMM-Difference. The results show that a company's performance has a significant impact on the CEO's remuneration. Vice versa results are found on the firm’s size and debt ratio. Furthermore, the results show that family businesses pay their CEOs for performing more in case of...