The effect of remuneration committees, directors’ shareholding and institutional ownership on the remuneration of directors in the top 100 companies in South Africa

Abstract

Executive directors’ remuneration of leading South African companies often attracts the attention of the press, shareholders and unions. The research on which this article is based investigated whether executive directors’ remuneration of the Top 100 companies listed on the Johannesburg Securities Exchange (JSE) is infl uenced by the implementation of certain corrective corporate governance measures. The remuneration of executive directors was regressed on a number of fi rm and corporate governance characteristics to determine whether these characteristics have an infl uence on executive directors’ remuneration. It was found that corporate  governance reforms relating to institutional ownership, the number of non-executive directors on the remuneration committee, shareholder voting on the remuneration policy and the number of remuneration  committee meetings act as an effective governance tool to protect shareholders’ interests with regard to some of the elements of executive directors’ remuneration.

Key words: executive directors’ remuneration, agency theory, corporate governance, remuneration committee, directors’ shareholding, institutional ownership