Executive directors’ remuneration in South Africa: an examination of the effectiveness of corporate governance reforms

Purpose This study aims to examine the effectiveness of corporate governance reforms in South Africa, focusing on the impact of the transition from King III to King IV on the executive directors’ remuneration (EDR)-performance relationship in publicly listed firms. Design/methodology/approach Using panel linear regression analysis, the study analysed the EDR-performance relationship. Additionally, a quasi-natural experimental design was employed to assess the effects of King IV on this relationship. Findings The results suggest that, contrary to earlier empirical research and stakeholder perceptions, Johannesburg Stock Exchange-listed firms on average link EDR to firm performance. The results therefore show that this EDR-performance relationship further improved following recent governance reforms in South Africa – specifically with the replacement of King III with King IV. Research limitations/implications The study underscores the importance of King IV governance reforms for South African firms; however, the study was limited to publicly listed firms. Practical implications South African firms are encouraged to incorporate both short-term and long-term incentive remuneration components in executive remuneration contracts to align interests, minimise agency problems and enhance firm value. Social implications This study promotes responsible remuneration practices, potentially mitigating income inequality concerns and fostering societal well-being in South Africa. Originality/value This study contributes novel empirical evidence on King IV’s influence on the EDR-performance relationship in South Africa, addressing a gap in the literature and extending our understanding of the role of incentive remuneration in aligning behaviours and interests.