The Effects of Fintech Adoption on CEO Compensation: Evidence from JSE-Listed Banks

Over the last decade, there has been a significant increase in banks’ investment in technology, alongside a substantial rise in CEO compensation. Research on executive compensation has primarily focused on traditional performance metrics, such as return on assets and return on equity, as well as governance factors. Investigating the nexus between fintech adoption and CEO compensation introduces a new perspective on the determinants of CEO pay and how technological transformation influences executive remuneration structures. This study investigated the relationship between Chief Executive remuneration and fintech adoption among banks listed on the Johannesburg Stock Exchange. There is a lack of literature on the impact of technology adoption on CEO compensation in developing and emerging economies. The quantitative longitudinal study, conducted over 15 years from 2010 to 2024, collected secondary data from the annual reports of six banks and the IRESS database. A panel data fixed effects regression analysis was employed to analyze the data. CEO compensation included both salary and total compensation. Fintech variables used for the study included automated teller machines, mobile banking, and internet banking. The findings revealed a positive relationship between CEO salary and the rollout of ATMs and mobile banking, while an inverse relationship was noted between salary and internet banking. Similarly, total compensation showed an inverse relationship with the adoption of ATMs and internet banking, whereas mobile banking had a positive effect on total compensation. Understanding how technology impacts CEO compensation can help remuneration committees ensure that CEO pay is linked to the value that infrastructure investments bring to an organization, rather than simply the number of innovations introduced. This understanding will also help solve the principal-agent problem, as it will ensure technology innovations that enhance firm performance are rewarded. In the context of emerging markets, the study’s findings suggest that organizations should recognize and formalize pay linked to digital transformation, rather than focusing solely on short-term financial metrics. This also suggests the need to develop guidelines for executive remuneration disclosure related to the technology sector. The close connection between fintech adoption and technological and regulatory risks highlights the need to balance incentive structures that reward innovation with risk-adjusted performance measures.