The regulation of the determination of executive remuneration

  • Ernestine Ndzi

Student thesis: Doctoral Thesis


Executive remuneration is a prominent issue of corporate governance in the UK. Executive pay packages are regarded as excessive with no apparent link to company performance. This study examines the regulation of the determination of executive remuneration, especially in quoted companies. The study considers the regulation of the determination of executive remuneration as an important foundation that can potentially link executive pay to company performance. The study considers the principles of UK Corporate Governance Code on the determination of executive pay, and the Companies Act 2006’s provisions on executive remuneration.

The study adopts a mixed method approach which includes quantitative and qualitative studies. The UK Corporate Governance Code does not make recommendations on specific performance measures that companies should use to determine company performance. To investigate the link between pay and performance and the effect different performance measures have on the pay for performance link, the study examined 25 companies from five different sectors from 2010 FTSE 100 companies. Data was collected mainly from the company’s annual reports and accounts to determine the link between executive pay and company performance. The results indicated in general a weak link between pay and performance. It also demonstrated that different performance measures have different effects on the pay for performance link. The Code does not make recommendations on the factors that the remuneration consultants should consider in benchmarking. To this effect, interviews were conducted to establish the method of executive remuneration benchmarking as there exist no guidelines on benchmarking. Six prominent remuneration consultants where interviewed for which the data was obtained to analyse executive remuneration benchmarking. The findings demonstrated a lack of uniformity in benchmarking practices particularly in the factors considered in selecting comparator companies.

The Companies Act 2006 makes no provision on the determination of executive pay but rather adopts a corrective approach towards the determination of executive remuneration. This position of the law has been analysed in this study and suggest that the role of the law is inadequate and ineffective. The study demonstrates a need for a reform on the provisions of executive remuneration.

Date of AwardSept 2014
Original languageEnglish
Awarding Institution
  • University of Portsmouth
SupervisorLee Roach (Supervisor) & Damian Paul Carney (Supervisor)

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