Is executive remuneration in state-owned enterprises out of control? / Ferina Marimuthu

• Main Author: Marimuthu, Ferina
• Format: Book Section
• Language: English
• Published: Faculty of Accountancy 2019
• Subjects: Management. Industrial Management; Executives. Executive ability. Industrialists
• Online Access: http://ir.uitm.edu.my/id/eprint/43862/1/43862.pdf; http://ir.uitm.edu.my/id/eprint/43862/
• Institution: Universiti Teknologi Mara

suggested as being exorbitant and unjustified when compared to the deteriorating performance of the enterprises they manage. In South Africa, executive remuneration in SOEs has been scrutinised by the public and media, especially with large termination payments and the widening gap between ordinary employees and these executives. Furthermore, inconsistencies in remuneration amongst senior executives between SOEs is notably varying. There is no justification why CEOs in some SOEs are remunerated at considerably higher levels than in others, and there are also significant differences in the salary increases awarded to the CEOs of several SOEs. Remunerating executives should be based on their performance. Considering that several SOEs are experiencing financial constraints and are underperforming, remuneration not linked to performance is inflationary and places a substantial burden on taxpayers as the percentage of tax revenue would increase to fund the remuneration of the public sector executives. The main objective of this study, therefore, is to investigate whether executive remuneration in SOEs can be justified when compared to their performance in order to validate the public views. An unbalanced panel of 33 commercial SOEs in South Africa during the period 1995 to 2017 was examined. The two-step System Generalised Methods of Moment estimator, was employed. The main variables were executive remuneration as the independent variable and financial performance as the dependent variable. The analysis indicated that there was a negative relationship between executive remuneration and financial performance. This paper concludes that the public views on executive remuneration are not unjustified. Executive remuneration in the public sector is out of control as there is an inverse relationship between executive pay and the financial performance amongst SOEs in the sample.