TY - JOUR
T1 - The monitoring role of independent directors in CEO pay-performance relationship
T2 - the case of Malaysian government linked companies
AU - Chee-Wooi, Hooy
AU - Chwee-Ming, Tee
N1 - Funding Information:
An earlier version of this paper was presented at the Applied International Business Conference in Labuan, Malaysia, 6–8 November 2008. We thank the conference participants for valuable comments. We gratefully acknowledge funding from Permodalan National Berhand.
PY - 2010/9
Y1 - 2010/9
N2 - This study looks into the pay-performance and monitoring issues in Malaysian government linked companies (GLCs). Our study utilizes 21 Malaysian public listed GLCs data from financial year 2001 until 2006. We adopt panel regression to study pay-performance relationship while the internal monitoring mechanism is measured by board independence. In our analysis, chief executive officer (CEO pay is regressed to individual performance as well as benchmarked against industry average. Generally, we document that the pay-performance relationship in Malaysian GLCs is sporadically significant, implying that CEO pay is not properly aligned to performance. However, pay-earning-sensitivity (EPS) is high and statistically significant when individual performances are benchmarked against industry average in GLCs with more than 50% independent directors (majority board). This implies that for Malaysian GLCs, a majority independent board is required to ensure effective monitoring on CEOs' performance.
AB - This study looks into the pay-performance and monitoring issues in Malaysian government linked companies (GLCs). Our study utilizes 21 Malaysian public listed GLCs data from financial year 2001 until 2006. We adopt panel regression to study pay-performance relationship while the internal monitoring mechanism is measured by board independence. In our analysis, chief executive officer (CEO pay is regressed to individual performance as well as benchmarked against industry average. Generally, we document that the pay-performance relationship in Malaysian GLCs is sporadically significant, implying that CEO pay is not properly aligned to performance. However, pay-earning-sensitivity (EPS) is high and statistically significant when individual performances are benchmarked against industry average in GLCs with more than 50% independent directors (majority board). This implies that for Malaysian GLCs, a majority independent board is required to ensure effective monitoring on CEOs' performance.
KW - Board structure
KW - Corporate governance
KW - Director pay
KW - Government-linked companies
KW - Performance
UR - https://www.scopus.com/pages/publications/79960606356
U2 - 10.1080/17520843.2010.498136
DO - 10.1080/17520843.2010.498136
M3 - Article
AN - SCOPUS:79960606356
SN - 1752-0843
VL - 3
SP - 245
EP - 259
JO - Macroeconomics and Finance in Emerging Market Economies
JF - Macroeconomics and Finance in Emerging Market Economies
IS - 2
ER -