Effects of Corporate Governance Attributes on Chief Executive Officer Compensation among Selected Nigerian Banks

Abstract

CEO remuneration has attracted the attention of investors, the press, regulators, analysts, and academics in recent years. This is especially true given the assumption that CEOs have amassed wealth. Concurrently, their companies' fortunes continue to decline. Due to mounting concerns about the excessive spending and reckless lifestyles of many bank executives, the question of CEO compensation has become a recurring topic of discourse among many researchers, especially as previous empirical studies have remained inconsistent and inconclusive. This study extends prior research by examining the influence of corporate governance practices on executive compensation by listed companies in Nigeria. The study examines the impact of corporate governance attributes and firm performance on the CEO compensation of publicly traded Nigerian banks between 2011 and 2020. The corporate governance attributes were proxied by CEO age, CEO tenure, and board size, while firm performance was measured by return on equity (ROE) and return on capital employed (ROCE). The fixed-effect regression technique was used to investigate the association between the independent and dependent variables. A sample size of 9 banks was chosen from a population of 22 commercial banks. The findings showed that ROE and board size significantly positively influences CEO remuneration. Furthermore, CEO age and tenure have no significant effect on CEO compensation. This study recommends that the board size be maintained at a manageable size for effective and efficient business operations. This is because a larger size may lead to ineffective decisions due to poor communication and coordination.

Keywords: Firm Performance; Return on Assets; CEO Age; CEO tenure; Board Size; fixed effect regression