Corporate governance of executive directors' remuneration: Measurement and determinant analysis

Purpose: The purpose of this study was twofold - to measure the extent of corporate governance disclosure that aims to govern executive directors' remuneration (CGE) compliance for a sample of firms listed on the Johannesburg Securities Exchange, and to develop a model that best explains variations in CGE disclosure levels amongst listed firms. Design/methodology/approach: A CGE score was calculated for each of the firms included in the study sample of 100 firms, using a self-constructed measurement instrument. The CGE instrument consists of 114 CGE measures based on the King III- and King IV codes, Johannesburg Securities Exchange listing requirements, the Companies Act and international best practice. A literature review was conducted to identify possible determinants of CGE, whilst stepwise regression model-building was used to develop a model that best explains variation in CGE disclosure practices. Findings: The results showed that larger firms, more profitable firms, and firms that were audited by a big four audit firm, outperform other firms in CGE disclosure practices. Noteworthy, is that CGE disclosure practices appear to be neglected by firms with higher levels of managerial power, as measured by directors' shareholding. Finally, firms in the financial services industry had lower CGE scores compared to firms listed in the basic materials, industrials, and goods- and services industries. Originality/value: This study sought to extend and contribute to the knowledge, by providing evidence on the disclosure of CGE measures and insights into the determinants of CGE disclosure in the South African market. The findings offered insights into the financial variables, firm characteristics and ownership variables that drive the disclosure of CGE measures. Strengthening CGE disclosure may provide shareholders and other stakeholders sufficient information to comprehend the remuneration decisions made by firms. In conclusion, the findings suggested that policy-makers and regulators should consider providing more guidance and training to firms struggling to implement CGE measures.