Rampling, PN 2015, 'CEO and executive director remuneration practice and corporate financial performance: a comparison of practices in the USA, UK and Australia', PhD thesis, Southern Cross University, Lismore, NSW.
Copyright PN Rampling
This study investigates the relationship between Executive Director and CEO Remuneration and Corporate Performance. The issue has been the subject of intense scrutiny by shareholders, media, government and corporate stakeholders for fair value remuneration verses shareholder and corporate financial returns in recent times. Prior to 2000, economic shocks and financial effects on firms were relatively containable to regions and countries and this financial contagion was limited geographically. In this pre-2000 environment, executives and their remuneration packages were not in the spotlight, and the focus on the relationship between executive remuneration and corporate financial performance relationship was of a confirmatory nature, being that the relationship was recognised but generally accepted without question. In the period since 2000, when economic shocks and financial effects on corporations became much more severe and global financial contagion, resulted in a wider focus on executive remuneration packages and thus transforming attention from a confirmatory to an explanatory focus.
As a result, much of the emphasis was centred on the analysis of relationships between Executive Director and CEO remuneration and on corporate financial performance and shareholder returns. In order to uncover a deeper understanding of these relationships, this study analysed these and other key relationships in the USA, UK and Australia for financial years ending 2001 – 2012 by analysing disclosures and data from 305 public listed companies residing in these jurisdictions. The results of this research reveal that there are significant relationships between corporate financial performance, being the study’s dependant variable, and Executive board director and CEO remuneration, as well as institutional shareholding in all three jurisdictions. It was also found that the relationship with board practice is significant in the UK and Australia, but not in the USA. Finally, it was found that the relationship with the use of remuneration committees is significant in the UK and Australia, though not in the USA and that there was no significant relationship with the use of remuneration consultants in any of the jurisdictions of this study.