Int. J. of Monetary Economics and Finance   »   2015 Vol.8, No.2



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


Authors: Syaiful Baharee Jaafar; Mohd Mohid Rahmat; Kieran James


Commerce Department, Polytechnic Tuanku Sultanah Bahiyah, Kulim Hi-Tech Park, 09000, Kulim Kedah, Malaysia
Faculty of Economics and Management, The National University of Malaysia, 43600 UKM, Bangi Selangor, Malaysia
School of Economic and Business, University of Fiji Lautoka Campus, Private Mail Bag Laukota, Ba Province, Republic of Fiji


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.


Keywords: remuneration committee; board of directors; executive remuneration; non-executive directors; Malaysia; remuneration decisions.


DOI: 10.1504/IJMEF.2015.070778


Int. J. of Monetary Economics and Finance, 2015 Vol.8, No.2, pp.126 - 142


Available online: 23 Jul 2015



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