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

What is it about?

Many are questioning whether executive director remuneration is related to the right kind of company performance- that which increases value for shareholders rather than merely the size of the firm. We show that when certain statistical assumptions are not met, results can be misleading and can suggest that the director-performance relationship is of the right kind. When generalised method of moments are used, which are more robust to these assumptions, this relationship is found to be of the wrong kind- executive director remuneration is related only to total revenue, for the period 2010-2017, which followed the implementation of an important governance initiative (King III). These results may be particularly important in the context of the study- South Africa- given the recent decline in international rankings of the quality of its corporate governance.

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