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

Collins G. Ntim, Sarah Lindop, Dennis A. Thomas, Hussein Abdou, Kwaku K. Opong

Research output: Contribution to journalArticle

10 Citations (Scopus)

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.

LanguageEnglish
Pages1-43
Number of pages43
JournalInternational Journal of Human Resource Management
DOIs
Publication statusPublished - 30 Jan 2017

Fingerprint

Monitoring
Chief executive officer
Executive pay
Governance structure
Moderating effect
Pay-for-performance
Corporate governance
Prediction
Remuneration
Econometric models
Agency conflict
Endogeneity
Board structure
Contracting
Concentrated ownership
Africa
Managerial power
Shareholding
Ownership
Opportunism

Cite this

Ntim, Collins G. ; Lindop, Sarah ; Thomas, Dennis A. ; Abdou, Hussein ; Opong, Kwaku K. / Executive pay and performance : the moderating effect of CEO power and governance structure. In: International Journal of Human Resource Management. 2017 ; pp. 1-43.
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Executive pay and performance : the moderating effect of CEO power and governance structure. / Ntim, Collins G.; Lindop, Sarah; Thomas, Dennis A.; Abdou, Hussein; Opong, Kwaku K.

In: International Journal of Human Resource Management, 30.01.2017, p. 1-43.

Research output: Contribution to journalArticle

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