Volume 3, Number 2

For several years, and especially since the onset of the global financial crisis, executive remuneration which forms part of the agency problem and is also an integral part of corporate governance has attracted much attention in several forums such as the media and parliament in many parts of the world. Consequently, this has resulted in important reviews, legislation, and codes of conduct such as King Codes I, II, and III. The concern over executive remuneration is particularly relevant in South Africa since the South African Companies Act 2008 seeks to reaffirm companies as a means of promoting the economic welfare and development of the country by encouraging efficient, transparent value-additive corporate management and high standards of corporate governance. Discussions, reports, and investigations into executive remuneration have so far failed to examine the relationship between executive remuneration and corporate value addition, and so the question of whether or not executives are excessively remunerated cannot be factually sustained. This article highlights the use of the corporate valuation model for measuring the value added to companies by corporate executives. The model can further be compared with executive compensation, in particular performance-based pay. In the absence of measurement, it is not possible to contend whether corporate executives are being over or under-paid.

Keywords: Corporate Governance; Executive Remuneration; King Code I, II, III; South African Companies Act 2008.