Original Research

The impact of remuneration governance on chief executive officer overpayment

Mark Bussin, Albert Wöcke, Benno Deysel
South African Journal of Economic and Management Sciences | Vol 26, No 1 | a4860 | DOI: https://doi.org/10.4102/sajems.v26i1.4860 | © 2023 Mark Bussin, Albert Wöcke, Benno Deysel | This work is licensed under CC Attribution 4.0
Submitted: 27 September 2022 | Published: 17 March 2023

About the author(s)

Mark Bussin, Gordon Institute of Business Science, University of Pretoria, Pretoria, South Africa
Albert Wöcke, Gordon Institute of Business Science, University of Pretoria, Pretoria, South Africa
Benno Deysel, Gordon Institute of Business Science, University of Pretoria, Pretoria, South Africa


Background: Chief executive officer (CEO) payment and company performance are highly controversial, and existing research has focused on this link for decades. The study was conducted in South Africa where corporate governance regulators have introduced measures to improve the relationship between CEO pay and performance.

Aim: This research aimed to explore the problem by extending Pepper and Gore’s (2015) behavioural agency theory to examine the moderating effect of remuneration governance on the CEO pay – company performance relationship.

Setting: The study focused on the Top 100 listed companies in which several regulations concerning CEO pay were introduced, which provided the opportunity to examine such regulations on the alignment of CEO pay and company performance.

Method: Panel data from 67 company annual reports were analysed over two decades with 871 datapoints, divided into three periods corresponding with the introduction of regulations. Analyses included corrected panel standard errors and estimated generalised least squared hierarchical multiple regression and moderated multiple regression analyses.

Results: Results showed a statistically significant positive relationship between company performance measures and total CEO remuneration (including long-term incentives [LTIs]) for each of the three periods. We found that LTIs tied to performance-vested criteria and CEO minimum shareholding do enhance pay-performance sensitivity. Results further suggest that the behavioural agency theory is incomplete and researchers should consider the role of remuneration governance in moderating CEO overpayment.

Conclusion: Remuneration governance should be refined through the inclusion of retrospective CEO remuneration disclosure to increase pay-performance sensitivity.

Contribution: This research contributes to knowledge of CEO payment and company performance.


CEO remuneration; pay-performance sensitivity; corporate governance; share-based payments; behavioural agency theory; CEO overpayment

JEL Codes

J33: Compensation Packages • Payment Methods

Sustainable Development Goal

Goal 10: Reduced inequalities


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