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

Ntim, C. G., Lindop, S., Thomas, D. A., Opong, K. and Hussein, A. (2019) Executive pay and performance: the moderating effect of CEO power and governance structure. International Journal of Human Resource Management, 30(6), pp. 921-963. (doi: 10.1080/09585192.2017.1282532)

121453.pdf - Accepted Version



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 dataset. Our findings are three-fold. 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.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Opong, Professor Kwaku and Ntim, Professor Collins
Authors: Ntim, C. G., Lindop, S., Thomas, D. A., Opong, K., and Hussein, A.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:International Journal of Human Resource Management
Publisher:Taylor & Francis
ISSN (Online):1466-4399
Published Online:30 January 2017
Copyright Holders:Copyright © 2017 Informa UK Limited, trading as Taylor and Francis Group
First Published:First published in International Journal of Human Resource Management 30(6): 921-963
Publisher Policy:Reproduced in accordance with the publisher copyright policy
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