Insider perspectives on director remuneration governance deliberations

Abstract

PurposeCompanies around the globe increasingly receive immense shareholder scrutiny due to perceivably excessive executive director remuneration. The debate in South Africa intensifies due to severe pay inequality. The authors thus accounted for the perspectives of asset managers and listed financial services companies in South Africa pertaining to the impact of voting and engagement on director pay policies and practices.Design/methodology/approachSemi-structured interviews were conducted with selected asset managers, chief executive officers, chief financial officers and remuneration committee members of listed financial services companies to gauge their views on the impact of shareholder activism endeavours on remuneration governance. The qualitative data was analysed by conducting thematic analysis.FindingsMost of the asset managers and financial services representatives preferred proactive, private engagement on pay concerns, given the impact thereof on voting outcomes, and ultimately director remuneration practices and policies. Independent remuneration committees have a prominent role in facilitating engagements with investors to ensure fair remuneration.Research limitations/implicationsThe consequences should be clearer if organisations receive substantial votes against their pay policies and implementation reports. South African regulators can consider the “two-strikes” rule to ensure that action is taken in response to shareholder voting on director remuneration matters.Originality/valueRepresentatives of asset managers and listed financial services investee companies offered valuable insights on remuneration governance deliberations in an emerging market. This in-depth analysis highlights the importance of proactive engagement to ensure that corporate leaders are paid fairly.

Nomination and remuneration committee: a review of literature

“…There are several studies on the independence of nomination and remuneration committees, such as Van Zyl and Mans-Kemp (2023) who found that independent remuneration committees have an important role in facilitating relationships with investors to ensure fair remuneration. Ruigrok et al .…”