Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence

Studies conducted on the basis of agency theory and the recent developments of the managerial power theory have triggered many issues especially centered on the corporate governance mechanisms. Thus, this paper aims to investigate the effect of key variables - corporate governance structures, corpor...

Full description

Saved in:

Bibliographic Details
Main Author:	Muhammad Fareez, Yahya
Format:	Thesis
Language:	eng eng
Published:	2013
Subjects:	HD2709-2930.7 Corporations
Online Access:	https://etd.uum.edu.my/5104/1/s810222.pdf https://etd.uum.edu.my/5104/2/s810222_abstract.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.5104
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Wan Hussin, Wan Nordin
topic	HD2709-2930.7 Corporations
spellingShingle	HD2709-2930.7 Corporations Muhammad Fareez, Yahya Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
description	Studies conducted on the basis of agency theory and the recent developments of the managerial power theory have triggered many issues especially centered on the corporate governance mechanisms. Thus, this paper aims to investigate the effect of key variables - corporate governance structures, corporate performance, pay performance alignment policy and the use of remuneration consultants on directors' remuneration packages. The components of directors' remuneration packages tested are salary, fees, bonus, benefit-in-kind and other emoluments. The study also tests total directors' remuneration to investigate any significant different in the regression results. The study controls the effect of firm size and sector. Fourty one Malaysian public listed companies are selected based on the result from the survey conducted by the Minority Shareholder Watchdog Group (MSWG) and published in the Malaysian Corporate Governance Report. Based on the multiple regression analysis, it is found that corporate governance structures - board size, board and remuneration committee independence and board diversity (gender and nationality) are significantly affect individual component of directors' remuneration packages. However, the impact of board diversity (nationality) on total directors' remuneration is insignificant. Corporate performance does affect the determination of total directors' remuneration for the component of other emoluments. The study also shows that companies that disclose pay performance alignment policy in the annual report do reward their directors according to what they declare with concentration on salary, fees and benefit-in-kind components without significantly affect the total directors' remuneration. The use of remuneration consultants does influence the design of directors' remuneration packages. Finally, the results show that agency theory and managerial power theory is relevant in partially explaining the components of directors' remuneration packages in Malaysia
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Muhammad Fareez, Yahya
author_facet	Muhammad Fareez, Yahya
author_sort	Muhammad Fareez, Yahya
title	Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
title_short	Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
title_full	Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
title_fullStr	Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
title_full_unstemmed	Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence
title_sort	determinants of directors’ remuneration packages among public listed companies: malaysian evidence
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2013
url	https://etd.uum.edu.my/5104/1/s810222.pdf https://etd.uum.edu.my/5104/2/s810222_abstract.pdf
_version_	1776103666324865024
spelling	my-uum-etd.51042023-01-18T08:33:56Z Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence 2013 Muhammad Fareez, Yahya Wan Hussin, Wan Nordin Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HD2709-2930.7 Corporations Studies conducted on the basis of agency theory and the recent developments of the managerial power theory have triggered many issues especially centered on the corporate governance mechanisms. Thus, this paper aims to investigate the effect of key variables - corporate governance structures, corporate performance, pay performance alignment policy and the use of remuneration consultants on directors' remuneration packages. The components of directors' remuneration packages tested are salary, fees, bonus, benefit-in-kind and other emoluments. The study also tests total directors' remuneration to investigate any significant different in the regression results. The study controls the effect of firm size and sector. Fourty one Malaysian public listed companies are selected based on the result from the survey conducted by the Minority Shareholder Watchdog Group (MSWG) and published in the Malaysian Corporate Governance Report. Based on the multiple regression analysis, it is found that corporate governance structures - board size, board and remuneration committee independence and board diversity (gender and nationality) are significantly affect individual component of directors' remuneration packages. However, the impact of board diversity (nationality) on total directors' remuneration is insignificant. Corporate performance does affect the determination of total directors' remuneration for the component of other emoluments. The study also shows that companies that disclose pay performance alignment policy in the annual report do reward their directors according to what they declare with concentration on salary, fees and benefit-in-kind components without significantly affect the total directors' remuneration. The use of remuneration consultants does influence the design of directors' remuneration packages. Finally, the results show that agency theory and managerial power theory is relevant in partially explaining the components of directors' remuneration packages in Malaysia 2013 Thesis https://etd.uum.edu.my/5104/ https://etd.uum.edu.my/5104/1/s810222.pdf text eng public https://etd.uum.edu.my/5104/2/s810222_abstract.pdf text eng public masters masters Universiti Utara Malaysia Abdullah, S. N. (2006).Directors' Remuneration, Firm's Performance and Corporate Governance in Malaysia among Distressed Companies. Corporate Governance, 6(2), 162-175. Abdullah, S. N., Ku Ismail, K. N. I., & Nachum, L. (2012). Women on Boards of Malaysian Firms: Impact on Market and Accounting Performance. Retrieved from http://ssrn.com/abstract=2145007 or http://dx.doi.org/l0.2139/ssrn.2145007. Accessed May 03, 2013. Adams, R. B. and Ferreira, D. (2004). Gender Diversity in the Boardroom. ECGI Working Paper Series in Finance. Working Paper No. 5812004. Available at http://ssrn.com/abstract=594506. hmaier, Tom, Making It to the Top: From Female Labor Force Participation to Boardroom Gender Diversity (December 22, 2012). ECGI - Finance Working Paper No. 34712013; Asian Finance Association (AsFA) 2013 Conference. Available at SSRN: http://ssrn.com/abstract=2192918 or http://dx.doi.org/10.2139/ssrn.2192918. Baker, G. P., Jensen, M. C., &Murphy, K. J. (1988). Compensation and Incentives: Practice vs. Theory. Journal of Finance. 43, 593. Bebchuk, L. A., & Fried, J. M. (2004). Pay Without Performance: The Unfulfilled Promise Of Executive Compensation. Cambridge: Harvard University Press. Bebchuk, L. A,, Fried, J. M., &Walker, D. I. (2002). Managerial Power and Rent Extraction in the Design of Executive Compensation. Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series, Discussion Paper Series No. 366, 06/2002. Bell, L. (2005). Women-Led Firms And The Gender Gap In Top Executive Jobs. IZA discussion paper no. 1689. Berle, Adolph A,, & Gardiner C., Means, (1932). The Modem Corporation and Private Property. Paperback edition published in 1991 by Transaction Publishers. Buck, T., Bruce, A,, Main, B. G. M., & Udueni, H., (2003). Long Term Incentive Plans, Executive Pay and UK Company Performance. Journal of Management Studies, 40(7), 1709-1727. Chen, H. (2006). Board Characteristics, Ownership Structure and Executive Remuneration in China. Cardiff University, Cardiff. Choe, C., Tian, G. Y., & Yin, X. (2009). Managerial Power, Stock-Based Compensation, and Firm Performance: Theory and Evidence. Retrieved Determinants Of Directors' Remuneration Packages from http://ssrn.com/abstract=1361327 or http://dx.doi.org/l0.2139/ssrn.1361327. Accessed May 03, 2013, Clarkson, P., Nichols, S., & Walker, J. (2005). Evidence on the Link between CEO Remuneration and Company Performance. Retrieved from http://ecocomm.anu. edu.au/fas/pdf/28oct2005.pdf. Accessed May 03, 2013. Conyon, M. J. (1997). Corporate Governance and Executive Compensation. International Journal of Industrial Organization, 15(4), 493-509. Conyon, M. J. (2007). Executive Compensation Consultants: Empirical Evidence from the United States and United Kingdom. ESSEC Business School and the Wharton School, University of Pennsylvania. Conyon, M. J., & Peck, S. I., (1998). Board Control, Remuneration Committee, And Top Management Compensation. Academy of Management Journal, 41(2), 146-157. Conyon, M. J., Simon I. P., & Graham V. S. (2006). Compensation Consultants and Executive Pay. Wharton-SMU Research Center: Singapore Management University. Daily, C. M., Johnson, J. L., Ellstrand, A. E., &Dalton, D. R. (1998). Compensation Committee Composition as a Determinant of CEO Compensation. Academy of Management Journal, 41(2), 209-220. Deckop, J. R. (1988). Determinants of Chief Executive Officer Compensation. Industrial and Labor Relations Review, 41(2), 215-226. Dogan, E., & Smyth, R. (2002). Board Remuneration, Company Performance, and Ownership Concentration: Evidence from Publicly Listed Malaysian Companies. ASEAN Economic Bulletin, 19(3), 319- 347. Ewers, D. (2002). Director Remuneration and Performance: A Study of Top UK Companies 1996-1998. Biunel University. Finkelstein, S., & Hambrick D. C. (1996). Strategic Leadership: Top Executives and Their Effects on Organizations. St Paul Minneapolis: West Publishing Company. Firth, M., Tam, M., &Tang, M. (1999). The Determinants Of Top Management Pay. Omega, 27(6), 617-35. Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance and Accounting, 33(7-8), 1034-1062. Jensen, M. (1993). The Modern Industrial Revolution, Exit and the Failure of Internal Control Systems. Journal of Finance, 48(3), 831-880. Determinants Of Directors' Remuneration Packages Jensen, M., & Murphy, K. (1990). Perfomance Pay and Top-Management Incentives. The Journal of Political Economy, 98(2), 225-264. Kato, T., & Kubo, K. (2004). CEO compensation and Firm Performance in Japan: Evidence from New Panel Data on Individual CEO Pay. Journal of Japanese International Economies, 20, 1-19. Kerkhoven, S. (2011). The Effects Of Female Board Members On CEO Compensation: How Women In The Board Of Directors Can Influence CEO Compensation Components. Erasmus University Rotterdam. Koenker, R. (1981). A Note on Studentizing a Test for Heteroskedasticity. Journal of Econometrics, 17, 107-112. Lipton, M., & Lorsch, J. W. (1992). A Modest Proposal for Improved Corporate Governance. Business Layer, 48(1), 59-77. Mace, M.L. (1986). Directors, Myth and Reality. Boston: Harvard Business School Press. Mangel, R., & Singh, H. (1993).0wnership Structure, Board Relationships and CEO Compensation in Large US Corporations. Accounting and Business Research, 23(91A), 339-350. MarcV. E., Jordan O., & Edward J. C. (2012). Assessing Managerial Power Theory: A Meta-Analytic Approach to Understanding the Determinants of CEO Compensation. Journal of Management. Retrieved from http://works.bepress. com/marc_vanessen/10. Accessed May 03, 2013. Mason, C. H., & Perreault, W. D. (1991). Collinearity, power and Interpretation of Multiple Regressino Analysis. Journal of Marketing Research, 28, 268-280. Maybank Investment Bank Berhad. (2012). 2012 Outlook & Issues. Retrieved from http://www.maybankib.com/ pdf/Econs%200utlook%202012.pdf. Accessed May 03, 2013. Mehran, H. (1995). Executive Compensation Structure, Ownership and Firm Performance. Journal of Financial Economics, 38, 163-184. Minority Shareholder Watchdog Group (MSWG). (2011). Malaysian Corporate Governance Index Report 2011. Mustapha, M.Z. (2012). Determinants of Executive Directors' Remuneration among Malaysian Public Listed Companies. Accounting and Finance, Cardiff Business School Cardiff University. Nielsen, S. and Nielsen, B.B. (2008). The Effects Of Top Management Team And Board Nationality Diversity And Compensation Systems On Firm Performance. Retrieved from Determinants Of Directors' Remuneration Packages http://aom.pace.edu/pro ceedings/2008/CD_Staging/Contents/Best_Papers/ BPS/the%20effects%20of.pdf. Accessed May 03, 2013. O'Reilly, C. A., III, C. A., Belliveau, M. A., &Wade, J. B. (1996). Social Capital at the Top: Effects of Social Similarity and Status on CEO Compensation. Academy of Management Journal, 39(6), 1568-1593. Randsy, T., & Nielsen, J. (2002). Company Performance, Corporate Governance and CEO Compensation in Norway and Sweden. Journal of Management and Governance, 6(1), 57-81. Salim, B., & Wan-Hussin, W.N. (2009). Remuneration Committee, Ownership Structure and Pay-For-Performance: Evidence &om Malaysia. Retrieved from http://papers.ssrn.com/so13/papers.cfm?abstract_ id=1155166. Accessed May 03, 2013. Securities Commission Malaysia. 2012. Malaysian Code on Corporate Governance. Retrieved from http://www.sc.com.my/eng/html/cg/cg2012.pdf. Accessed May 03, 2013. Shin, T. (2012). The Gender Gap In Executive Compensation The Role Of Female Directors And Chief Executive Officers. The ANNALS of the American Academy of Political and Social Science, 639(1), 258-278. Tosi, H. L., Werner, S., Katz, J. P., & Gomez-Mejia, L. (2000). How Much Does Performance Matter? A Meta Analysis of CEO Pay Studies. Journal of Management, 26(2), 301-339. Virtanen, A,, (2012). Women on Boards of Listed Companies: Evidence from Finland. Journal of Managing& Governance, 16(4), 571-593. West S. G., Finch J. F., & Curran P. J. Structural Equation Models with Nonnormal Variables: Problems and Remedies. In: Hoyle RH, Editor. Structural Equation Modeling: Concepts, Issues And Applications, 56-75. Newbury Park, CA. Sage. Computer Software: SPSS v.16 - for windows, Release v16 (September 13, 2007).

Determinants of directors’ remuneration packages among public listed companies: Malaysian evidence

Similar Items