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An empirical examination of the role of the remuneration committee in the relationship between board of directors and remuneration

Author

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  • Syaiful Baharee Jaafar
  • Mohd Mohid Rahmat
  • Kieran James

Abstract

There is a serious agency problem when a board of directors' remuneration is not linked with performance. Therefore, a remuneration committee's role is to ensure the remuneration follows proper policies and procedures. This study examines the relationship between the board of directors and remuneration as moderated by the remuneration committee. Its sample size is 386 firms listed in Bursa Malaysia studied from 2007 to 2009. Findings from this study indicate a significant positive relationship between remuneration committees and remuneration, which suggests the effectiveness of the committees. Furthermore, evidence from this study shows that the board of directors has a significant negative influence on non-executives' remuneration. Our study suggests that the non-executive director has less power in remunerative decisions than the executive director, reducing his or her own remuneration. However, this study cannot find evidence of a relationship between the board of directors and executive remuneration.

Suggested Citation

  • Syaiful Baharee Jaafar & Mohd Mohid Rahmat & Kieran James, 2015. "An empirical examination of the role of the remuneration committee in the relationship between board of directors and remuneration," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(2), pages 126-142.
    • Handle: RePEc:ids:ijmefi:v:8:y:2015:i:2:p:126-142
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    Cited by:

    1. Anas Idris Abdulwahab & Hussaini Bala & Onipe Adabenege Yahaya & Murtala Abdullahi, 2023. "Corporate Governance Committees and Sustainability Reporting of Listed Consumer Goods Firms in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(7), pages 1761-1770, July.

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