Original Research

The relationship between CEO compensation and company performance in a South African context

Samuel Bradley
Journal of Economic and Financial Sciences | Vol 6, No 3 | a247 | DOI: https://doi.org/10.4102/jef.v6i3.247 | © 2018 Samuel Bradley | This work is licensed under CC Attribution 4.0
Submitted: 26 June 2018 | Published: 31 October 2013

About the author(s)

Samuel Bradley, Rhodes University, South Africa

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Abstract

The goal of this research was to determine, in a South African context, whether there is any correlation between chief executive officer compensation and the performance of the company. For the purposes of the research, the compensation of chief executive officers was broken down into three components: salary, bonus and ‘other’ remuneration, while company performance was measured on return on equity, return on assets and earnings per share figures. Data in respect of the forty largest listed companies in South Africa were collected over a period of five years. The results of this study indicate that there is no linear relationship between chief executive officer compensation and company performance variables. The econometric models did, however, show correlations between certain variables, taking into account the other predictor variables in the model. Evidence of correlations between age, experience and compensation was also found.

Keywords

chief executive officer; company performance; compensation; remuneration; return on equity; earnings per share; return on assets; CEO age; CEO experience

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