The chief executive officer pay–performance relationship within South African state-owned entities

Bezuidenhout, Magda L.; Bussin, Mark; Coetzee, Mariette

doi:10.4102/sajhrm.v16i0.983

Cited by 5 publications

(8 citation statements)

References 30 publications

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“…In contrast, research on the link between executive remuneration and organisational performance in South African state-owned entities has found both positive and negative relationships (Bezuidenhout et al, 2018). Bradley (2013), using panel data from the largest 40 JSE companies across the years 2006-2010, however, found no correlation between chief executive officer remuneration and company performance measured as return on equity, return on assets and earnings per share.…”

Section: Theory and Literaturementioning

confidence: 92%

Executive director remuneration and company performance: panel evidence from South Africa for the years following King III

Padia

Callaghan

2020

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PurposeIn the wake of certain corporate scandals, many stakeholders are questioning if current high levels of executive remuneration, world-wide, are in fact related to company performance. After the implementation of King III in 2010, there has been an expectation that governance has improved in South African companies. If so, empirical testing should find executive remuneration to be positively related to forms of performance that reflect an increase in company value, like Tobin's Q, or return on assets, rather than measures such as total revenue.Design/methodology/approachAgency theory predicts that if executive remuneration is not carefully designed to maximise the value of the company, executive directors will tend to maximise revenue instead. To test this prediction, hand-collected panel data from Johannesburg Stock Exchange company reports are linked to company performance data to test this prediction, across the years 2010–2017, post King III.FindingsResults challenge certain important assumptions. Generalised method of moments tests find total revenue, rather than value added measures of performance such as Tobin's Q or return on assets, to predict executive director remuneration. This is notwithstanding the significance of Tobin's Q in testing based on ordinary least squares. Implications of these findings for the field are derived and discussed.Originality/valueUnique findings suggest that complacency about the relationships between executive director compensation and company performance is unwarranted. In light of a decline in the country's international rankings on the quality of its corporate governance, a renewed focus on the effectiveness of human resource compensation strategy may be necessary in this context.

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Section: Theory and Literaturementioning

confidence: 92%

Executive director remuneration and company performance: panel evidence from South Africa for the years following King III

Padia

Callaghan

2020

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“…However, in South African state-owned entities (SOEs), Bussin and Ncube (2017) found a strong link between CEO and CFO pay to the financial performance of the SOE. Subsequent research by Bezuidenhout, Bussin, and Coetzee (2018) on Schedule 2 State-Owned Enterprises in South Africa found a strong positive correlation between total CEO remuneration and operating profit, and a negative correlation between total CEO remuneration and net profit.…”

Section: The Concept Of Fairnessmentioning

confidence: 96%

Accounting for uncontrollable factors in executive incentive scheme designs

Dhliwayo

Bussin

2019

SA j. hum. resour. manag.

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Orientation: Classic agency theory posits that the impact of uncontrollable factors should be excluded from executive remuneration. Existing research, however, shows a departure from this theory.Research purpose: This study sought to determine the approaches organisations take and the reasons thereof to account for uncontrollable factors in the design of their executive incentive schemes.Motivation for the study: There is little research in South Africa on how organisations account for uncontrollable factors in the design of their incentive schemes.Research approach/design and method: An exploratory qualitative research using semi-structured interviews was conducted.Main findings: South African organisations are not strictly conforming to the classic agency theory prediction for uncontrollable factors as some allow the impact of uncontrollable factors to be included, and further, hybrid approaches may be applied.Practical/managerial implications: The menu of approaches presented will aid designers of incentive schemes to identify a tried and tested approach to adopt or improve their incentive-related policies.Contribution/value-add: An expanded list of uncontrollable factors identified from South Africa’s uniqueness is presented. Models for (1) accounting for uncontrollable factors in incentive schemes and (2) pay for individual performance versus firm performance dilemma are presented. These add to the body of existing literature.

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“…A general observation from previous studies show that different performance measures are used, with most being accounting and traditional performance measures, such as return on assets, return on equity (ROE) or revenue (Maloa & Bussin, 2016). Nearly all the studies of SOEs used financial figures as a proxy for company performance to examine relationships between company performance and CEOs' remuneration, for example, Bezuidenhout et al (2018), and Mbo and Adjasi (2014).…”

Section: State-owned Enterprises Versus Private Companiesmentioning

confidence: 99%

“…Long-term incentives (LTIs) were excluded from this study. State-owned-enterprises are not registered on the JSE, with a small number of SOEs providing LTI schemes (Bezuidenhout et al, 2018). Furthermore, the erratic nature of LTI pay-outs (Carlson & Bussin, 2020;Kirsten & Du Toit, 2018) would have introduced unsubstantiated influence during the research period.…”

Section: Exclusionsmentioning

confidence: 99%

“…However, weak governance, maladministration, fraud and corruption claims and the lack of financial sustainability at a number of these SOEs have been in the public eye for the past few years (Accountant General South Africa, 2018). In addition, the exorbitant remuneration packages of CEOs of poor performing South African SOEs have been extensively publicised by the media and has attracted extensive interest from various stakeholders (Bezuidenhout, Bussin, & Coetzee, 2018). The excessive remuneration levels of executives within South Africa SOEs have been studied because of the large wage gap between executives and lower-level employees and the perceived underperformance within SOEs (Bussin & Ncube, 2017).…”

Section: Introductionmentioning

confidence: 99%

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The effect of the economic crisis on pay-performance link in South African state-owned enterprises

Bezuidenhout

2021

South African Journal of Business Management

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Purpose: The dissatisfaction with executive remuneration worldwide has increased because it is generally believed to have been instrumental to the 2008 Global Economic crisis. Central to this is the apparent unsatisfactory relationship between business performance and chief executive officer (CEO) remuneration. The primary aim of this study was to compare the pay-for-performance association between CEOs’ remuneration and state-owned entity performance before, during and after the economic crisis. It did so by assessing the chief executive remuneration link with state-owned enterprise performance from the period 2006 to 2014.Design/methodology/approach: Twenty-one schedule 2 state-owned enterprises in South Africa. This quantitative, longitudinal study, obtained secondary data from the annual reports of state-owned enterprises from the period 2006 to 2014. Ordinary least square multiple regression analysis was used as the principal statistical method.Findings/results: The findings indicate that the link between chief executive remuneration and state-owned entity performance demonstrated different patterns in the pre- and post-crisis periods.Practical implications: State-owned entity remuneration committees should place more emphasis on the financial efficiency measurements to enhance efficiencies in South African state-owned enterprises. Shareholders and regulators should take cognisance of measures to be used to assess the potential performance of state-owned entities, through executive remuneration, especially during an economic crisis. Findings could furthermore be of importance to other academics investigating this phenomenon.Originality/value: This research provides additional knowledge to the limited research available on SOEs in South Africa. Further, it reveals that an economic downturn affects the link between CEOs’ remuneration and SOE performance. This addresses a knowledge gap concerning the pay-for-performance link in South African SOEs and in emerging economies in general.

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The chief executive officer pay–performance relationship within South African state-owned entities

Cited by 5 publications

References 30 publications

Executive director remuneration and company performance: panel evidence from South Africa for the years following King III

Executive director remuneration and company performance: panel evidence from South Africa for the years following King III

Accounting for uncontrollable factors in executive incentive scheme designs

The effect of the economic crisis on pay-performance link in South African state-owned enterprises

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