Determinants of Directors' Remuneration in Malaysian Public Listed Companies

Abstract

The aim of this paper is to investigate the determination of directors' remuneration in Malaysian Listed companies. In particular, it investigates whether corporate governance structure and firm-specific characteristics have an influence over the directors' compensation. Using a sample of 120 companies listed on the Main Board of Bursa Malaysia, our analysis documents that firms with a greater numbers of members on the board are more inclined to increase their remuneration. It also reports that as ownership concentration increases, the amount of directors' remuneration decreases due to the effective monitoring by the external block-holders.

This study supplements the compensation literature by providing unique insights into drivers of excessive directors' compensation. The sole determinant of variation in directors' remuneration appears to be the firm-specific attributes in term of firm size, leverage and performance indicating a positive sign on Malaysia's corporate culture as directors' remuneration is dependent on the economic factors rather than being controlled by the board itself. This study offers insights to policy makers and regulatory agencies in designing executive compensation and corporate governance structure in emerging economies.