The scantness of the effect of corporate governance mechanisms on executive directors’ remuneration in small listed companies: evidence from Malaysia

Purpose This study extensively aims to investigate the effects of different aspects of corporate governance (CG) mechanism, including board size, executive directors’ shareholdings, Chief Executive Officer (CEO) duality, a family member as the CEO and/or chairperson of the board, independent directors in remuneration committee and number of board meeting, on executive directors’ remuneration in small firms listed on Bursa Malaysia (BM). Design/methodology/approach The sample of this study consists of 173 bottom-listed companies from Bursa Malaysia in Year 2010. The Year 2010 was chosen because the disclosure of remuneration committee activities and directors’ pay structure is required under the revised Malaysia Code of Corporate Governance, 2007. Furthermore, the period selected is after the global economic crisis (2008), which may have an effect on the remuneration structure in small firms. The ordinary least squares regression was used to estimate the relationship between remuneration as dependent variable and other independent variables. Findings A finding from this study reveals that there is a significant positive relationship between executive ownership and executive remuneration, and between board size and executive remuneration. The results provide evidence that the family members manipulate power and control remuneration in small firms. This indicates that the independent directors are not truly independent to monitor and control the firm activities, including minimizing the excessive remuneration. Research limitations/implications This study examines how the corporate governance (CG) affects remuneration among 173 small firms in Malaysia based on market capitalization, for one year, 2010. Hence, the results may not be generalizable to other periods or types of the companies. This shows the possibility of the absence of some additional variables in the research model and hence a limitation to the findings of the study. Although the study is being parsimonious in the choice of relevant variables, prior literature serves the guide in the selection of the used variables. This therefore gives room for future research using the potential omitted variables. Furthermore, the study focuses on total remuneration, such as fees, salaries, bonuses and benefits in kind, which makes aggregate directors’ remuneration. However, this study did not consider the remuneration related to stock options. Finally, this study only uses secondary data; hence, it could be interesting to use other instruments to collect data like a questionnaire to add more weight to the research. This study only uses one-year data; therefore, impact of changes between years cannot be analysed. Originality/value Results of the study provide evidence that the family members manipulate power and control remuneration in small firms. They reduce the effectiveness of non-executive directors because most of them are appointed by a family member and not socially responsible to their stakeholders.

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6. Company Management and Governance

Concentrate Questions and Answers Company Law ◽

10.1093/he/9780198856726.003.0006 ◽

2020 ◽

pp. 100-120

Author(s):

Imogen Moore

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Executive Directors ◽

Corporate Governance Code ◽

Executive Remuneration ◽

Questions And Answers ◽

The Uk ◽

And Control ◽

The Relationship

The Concentrate Questions and Answers series offers the best preparation for tackling exam questions and coursework. Each book includes typical questions, suggested answers with commentary, illustrative diagrams, guidance on how to develop your answer, suggestions for further reading, and advice on exams and coursework. This chapter explores important issues in company management and corporate governance, starting by examining the role of directors and shareholders (and the relationship between them) and the separation of ‘ownership and control’. Since the early 1990s, the governance of listed companies has been dominated by self-regulatory codes (currently the UK Corporate Governance Code). This chapter examines how these codes operate and considers key themes in corporate governance, including the role of non-executive directors and auditors; the position of institutional investors; and executive remuneration.

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Whistle-blowing by external auditors in South Africa

Accounting Auditing & Accountability Journal ◽

10.1108/aaaj-11-2012-1154 ◽

2014 ◽

Vol 27 (5) ◽

pp. 834-862 ◽

Cited By ~ 15

Author(s):

Warren Maroun ◽

Jill Atkins

Keyword(s):

South Africa ◽

Corporate Governance ◽

Audit Quality ◽

Mandatory Reporting ◽

Content Type ◽

Whistle Blowing ◽

External Auditors ◽

Power And Control ◽

And Control ◽

African Setting

Purpose – The purpose of this paper is to explore how notions of disciplinary power manifest themselves in audit regulatory developments. When it comes to research on the relationship between audit quality and regulation, much of the prior scholarly work has kept to the positivist tradition of quantitative analysis under the guise of “economic rationality”. In contrast, this research takes an interpretive approach to provide an alternate and unique perspective, using motifs of Foucauldian power and control to illuminate the operation of external regulation in a South African setting. The paper examines what may be loosely described as a mandatory whistle-blowing duty imposed on external auditors. Design/methodology/approach – Detailed interviews with some of South Africa's leading corporate governance experts are used to highlight the disciplinary effect of an auditor's duty to bring reportable irregularities to the attention of an independent regulator. Findings – Blowing the whistle on irregularities contributes, not only to increasing the information made available to stakeholders, but to creating a valid expectation of auditors serving the public interest by enhancing a sense of transparency and accountability. Elements of resistance to panoptic-like control are, however, also present suggesting that, in part, the regulation may simply be creating the illusion of active reporting. Research limitations/implications – The research relies on a relatively small sample of subject experts and does not provide a complete account of regulatory developments taking place in South Africa and abroad. Additional research on the role of whistle-blowing in an external audit setting is needed focusing particularly on similarities and variations in interpretations of reporting by auditors from the perspective of more diverse stakeholder groups. Practical/implications – Mandatory reporting of irregularities by auditors can provided additional useful information for stakeholders and may contribute to demands for more effective reporting by auditors. Social implications – Arms-length regulation of the audit profession should not be seen only as a means of improving audit quality and the utility of audit reports. Powerful social forces are also. This research demonstrates how laws and regulations have a potential disciplinary effect on the audit profession that contributes to a restoration of confidence in the audit process after it is best by scandals, even if motifs of power and control are somewhat illusionary. Originality/value – This research addresses the need for more detailed analysis of precisely how mechanisms of accountability and transparency operate in the broader corporate governance arena. The paper also contributes to the calls for more detailed, context-specific studies of audit. Finally, this paper is one of the first to employ a critical theoretical perspective on audit in an African setting, responding to the need for contextual, methodological and theoretical eclecticism in the area of corporate governance research.

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Influence of independent directors on the market risks of Indian banks

Journal of Asia Business Studies ◽

10.1108/jabs-01-2020-0010 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Ankur Shukla ◽

Sivasankaran Narayanasamy ◽

Kanagaraj Ayyalusamy ◽

Saurabh Kaushik Pandya

Keyword(s):

Stock Exchange ◽

Annual Reports ◽

Independent Directors ◽

Executive Directors ◽

Content Type ◽

Market Risks ◽

Reserve Bank ◽

Indian Banks ◽

And Control ◽

The Impact

Purpose The purpose of this paper is to empirically explore the influence of independent directors (non-executive directors) on the market risks of the Indian banks. Design/methodology/approach This paper is based on the data collected over a period of seven years (2009-2016) for a set of 29 Indian banks that are the constituents of the National Stock Exchange 500 Index. The data for independent directors of the sample banks are extracted from the annual reports of the banks, whereas the data relating to the dependent and control variables are compiled from the Ace equity and the Reserve Bank of India databases. The study uses the panel data method for analysis of the collected data for the sample banks. Findings This study concludes that independent directors increase the market risks for Indian banks (measured through equity beta). Originality/value This is, perhaps, the first paper to look into the impact of independent directors on the market risks of Indian banks. The policymakers and banks may need to be aware of the risk implications of the findings of the study in the Indian context, such that the independent directors enable their banks in reducing the market risks.

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6. Company Management and Governance

10.1093/he/9780198745228.003.0006 ◽

2016 ◽

Author(s):

Imogen Moore

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Executive Directors ◽

Corporate Governance Code ◽

Executive Remuneration ◽

Questions And Answers ◽

The Uk ◽

And Control ◽

The Relationship

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6. Company Management and Governance

Concentrate Questions and Answers Company Law ◽

10.1093/he/9780198819882.003.0006 ◽

2018 ◽

Author(s):

Imogen Moore

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Executive Directors ◽

Corporate Governance Code ◽

Executive Remuneration ◽

Questions And Answers ◽

The Uk ◽

And Control ◽

The Relationship

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Rewards for failure: an explanation for anomalous executive remuneration

Journal of Indian Business Research ◽

10.1108/jibr-05-2013-0054 ◽

2014 ◽

Vol 6 (2) ◽

pp. 90-127 ◽

Cited By ~ 4

Author(s):

Suveera Gill

Keyword(s):

Stock Exchange ◽

Theoretical Perspective ◽

Valuable Insight ◽

Executive Directors ◽

Content Type ◽

Executive Remuneration ◽

Catalytic Role ◽

The Government ◽

And Performance ◽

And Control

Purpose – The present paper aims to question the rationale of paying a high remuneration to executives who are presiding over loss-making companies. The neoclassical wage model asserts that the remuneration of executive directors is positively related to their company’s financial performance. However, evidence suggests that executives can obtain a higher level of personal compensation regardless of how the company performs. Design/methodology/approach – The relationship between executive remuneration and performance for viable but loss-making Bombay Stock Exchange (BSE)-listed companies has been studied for 2009-2011. The paper examines the determinants of the level of executive remuneration as well as discerns the strength of the remuneration–performance relationship, both at the overall and across various board hierarchical levels, using the JM sensitivity and HL elasticity models. Findings – Results for univariate and multivariate analyses highlight that both the remuneration–performance sensitivity and elasticity are weak. Further, factors such as ownership structure, risk and industry class moderate the remuneration–performance elasticity. It seems that it is only the lower rung of executive directors whose cash remuneration gets adversely affected with the performance of the company. Originality/value – The paper offers valuable insight into the complexities relating to the remuneration performance relationship by putting forth a multi-theoretical perspective. The fact that executives are drawing a whopping remuneration while their companies continue to report disappointing results suggests that a catalytic role has to be played by the government so as to ensure that executive remuneration policies and practices are consistent with the company’s long-term objectives and control environment.

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Boards and governance of state-owned enterprises

Corporate Governance ◽

10.1108/cg-08-2012-0063 ◽

2014 ◽

Vol 14 (2) ◽

pp. 238-251 ◽

Cited By ~ 5

Author(s):

Samuel Nana Yaw Simpson

Keyword(s):

Corporate Governance ◽

Public Sector ◽

Boards Of Directors ◽

Evaluation Criteria ◽

Executive Directors ◽

Middle Income ◽

Content Type ◽

And Performance ◽

Legal Frameworks ◽

State Enterprises

Purpose – This study aims to examine the structure, attributes, and performance of boards of directors of state-owned enterprises (SOEs) within the broader context of public sector governance. This is informed by the less attention given to the concept among public sector organizations despite efforts to make state enterprises more effective and efficient, especially in developing and middle income countries. Design/methodology/approach – Data was collected through questionnaires self-administered in 2010 to all 25 SOEs in Accra, Ghana, out of the 29 nationwide. Some key officials were interviewed and documentary evidence analyzed to achieve triangulation of data and results. Findings – Results show that state-owned enterprises have boards and comply with the minimal governance issues outlined the legal frameworks establishing them. However, they exhibit significant weaknesses in the areas of board performance evaluation, criteria for board appointment, the balance of executive directors and non-executive directors, and other board characteristics, indicating a departure from general practices. Practical implications – Findings suggest the need for a tailored corporate governance framework or code for state-owned enterprises in developing countries. Originality/value – Compared to the literature, this study provides insight on boards from the perspective of state enterprises in ensuring good corporate governance, particularly in the context of a middle income country (Ghana).

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The Family—A Refuge from Demands or an Arena for the Exercise of Power and Control —Children’s Fictions on Their Future Families

Children's Childhoods ◽

10.4324/9780203486184-6 ◽

2002 ◽

pp. 69-84

Keyword(s):

Power And Control ◽

The Family ◽

And Control

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Malaysian evidence supporting theoretical integration of roles of non-executive directors

Asian Journal of Accounting Research ◽

10.1108/ajar-07-2018-0020 ◽

2018 ◽

Vol 3 (1) ◽

pp. 2-14

Author(s):

Hairul Azlan Annuar

Keyword(s):

Qualitative Research ◽

Corporate Governance ◽

Research Design ◽

Executive Directors ◽

Content Type ◽

Face To Face ◽

Qualitative Research Design ◽

Company Directors ◽

Code Of Corporate Governance

Purpose The purpose of this paper is to investigate the role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), other than the control role prescribed by agency theory and reformatory documents such as the Malaysian Code of Corporate Governance. Design/methodology/approach A qualitative research design, consisting of face-to-face interviews with 27 company directors of Malaysian-owned PLCs, was instigated. Findings The interviews revealed that INEDs do more than just monitor their executive counterparts. Apart from the control role, INEDs of Malaysian companies provide a conduit for mitigating uncertainties in the environment and perform invaluable services to the host companies. Research limitations/implications This research utilized interviews. Generalizations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random as access to many of the interviewed directors depended on recommendations. In addition, respondents were consciously selected in order to obtain various board positions that include independent and non-independent directors. Originality/value There are limited studies using qualitative research design in investigating INEDs’ performing other roles apart from the control role of the board in developing countries. Many of previous studies and literature in this area of corporate governance were predominantly based upon experiences of western economies.

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The board of directors and firm performance: empirical evidence from listed companies

Corporate Governance ◽

10.1108/cg-06-2018-0211 ◽

2019 ◽

Vol 19 (3) ◽

pp. 508-551 ◽

Cited By ~ 12

Author(s):

Alessandro Merendino ◽

Rob Melville

Keyword(s):

Corporate Governance ◽

Firm Performance ◽

Agency Theory ◽

Ownership Structure ◽

Listed Companies ◽

Independent Directors ◽

Board Structure ◽

Board Size ◽

Ceo Duality ◽

Content Type

PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.

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