Executive pay and performance: the moderating effect of CEO power and governance structure

By Collins G. Ntim, S. Lindop, Dennis Thomas, Hussein A. Abdou, Kwaku Opong. 2019

132 citations recorded by the source corpus.

Abstract This paper examines the crucial question of whether chief executive officer (CEO) power and corporate governance (CG) structure can moderate the pay-for-performance sensitivity (PPS) using a large up-to-date South African data-set. Our findings are threefold. First, when direct links between executive pay and performance are examined, we find a positive, but relatively small PPS. Second, our results show that in a context of concentrated ownership and weak board structures; the second-tier agency conflict (director monitoring power and opportunism) is stronger than the first-tier agency problem (CEO power and self-interest). Third, additional analysis suggests that CEO power and CG structure have a moderating effect on the PPS. Specifically, we find that the PPS is higher in firms with more reputable, founding and shareholding CEOs, higher ownership by directors and institutions, and independent nomination and remuneration committees, but lower in firms with larger boards, more powerful and long-tenured CEOs. Overall, our evidence sheds new important theoretical and empirical insights on explaining the PPS with specific focus on the predictions of the optimal contracting and managerial power hypotheses. The findings are generally robust across a raft of econometric models that control for different types of endogeneities, pay, and performance proxies.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/132569022e798aab956a4b557e5922e1f53df9d2

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Zam Zuriyati Mohamad
2. Nooraisah Katmon
3. O. Farooque
4. N. M. Norwani

In Strategy and Management

1. Zam Zuriyati Mohamad
2. Nooraisah Katmon
3. O. Farooque
4. N. M. Norwani

Citations in the corpus

• Corporate Boards, Ownership Structures and Corporate Disclosures: Evidence from a Developing Country (2018, unknown): “The final section (section 5) presents the conclusions, policy implications of the results, and directions for future research.”
• Corporate governance and dividend pay-out policy in UK listed SMEs: The effects of corporate board characteristics (2017, unknown): “70 annual board meetings and is in line with the similar findings of Ntim and Osei (2011), and Horváth and Spirollari (2012).”
• Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market (2017, background): “…La Porta et al. 2000), weak external mechanism (Claessens and Yurtoglu 2013), high family and concentrated ownership (Machuga and Teitel 2009; La Porta et al. 1999; Ntim et al. 2017), higher corruption index (Transparency International 2015) and unbalanced distribution of income (World Bank 2016).”