Friday, August 07, 2020 / 05:50 AM / By Proshare
Research / Header Image Credit: EcoGraphics
This section gives more context on the relationship between the CEO's remuneration and shareholder value creation. There have been various studies conducted to examine the possible relationship between the CEO's remuneration and shareholder value creation. Some studies have proven that there is a positive relationship between the CEO's remuneration and shareholder value created such as dividend paid, returns on equity, etc. Their arguments lie in the fact that there will be no motive for the CEO of a company to be highly remunerated if shareholders' value in the company did not improve.
There are new developments that have shaped the executive remuneration environment over the past decade. While these vary from region to region, they encompass such things as converging accounting practices, enhanced disclosure, and heightened attention on executive perquisites, benefits, and severance arrangements.
The impact of these changes has been widespread. While trends have played out differently in different regions, some common themes have emerged:
These developments are moving executive remuneration practices in the right direction. Around the globe, companies are taking a more comprehensive approach to executive remuneration design and making strides to improve the link between pay and performance.
Illustration 7: Stakeholder Objectives of Performance Measurement
Performance as Value Creation
There are numerous ways to measure performance. Stock price or earnings per share could be used to measure performance. Performance could also be examined against internal budgets or relative to peers. It can be measured over a single financial quarter, a year, a decade, or even the entire life of the business. Irrespective of the methods used, the objective is the same; to capture the amount of value that has been created.
Illustration 8: Key Business Processes and the Metrics Used to Gauge Performance in Each Area
Organizations generate multiple types of value which managements and shareholders stand to benefit immensely. To shareholders, value creation results from an increase in the enterprise value of the firm. For publicly traded companies, enterprise value is generated by increases in stock price, the payment of dividends or increases in asset value.
Illustration 9: Sample Value Chain Analysis
Downloadable Versions of 2020 Report (PDF)
Previous Year's Report and Links
Related News from CEO Remuneration 2020 Report
1. Top 10 highest earning CEO's in Nigeria - Nairametrics - July 10, 2020
2. Tinubu, Avuru top list of highest paid CEOs of quoted Nigerian companies - BusinessDay - April 23, 2019