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ASSESSING CORPORATE GOVERNANCE AND EXECUTIVE REMUNERATION USING SHARE OPTION PLANS
63 ABSTRACT
The modern global business environment pays much attention to the compensation of top-level managers and CEOs. It is common news in the global media that the compensation of many CEOs is rising at alarming rates, often far exceeding the rate of corporate earnings. This article provides an explanation of share options (stock options) and the role of corporate governance in South Africa and highlights the challenges and problems that the trend of high CEO compensation is posing to companies given that owners, boards and managers often battle it out to exert their preferred stand in this regard. Companies must espouse strong values that shareholders and stakeholders approve of and make CEO remuneration a sustainable part of a business management model. In recent times there has been a trend to pay CEOs million rand salaries, as part of the shareholder value ideology and this has led to their salaries skyrocketing. This is an attempt to limit the agency problem that exists between principals and their CEOs and directors and is a governance mechanism that thus tries to align the interests of principals and CEOs through salaries, bonuses and long-term incentive share options. Effective corporate governance frameworks must be in place and the mindset of incrementalism must be reconsidered at a time when shareholders are increasingly realizing that they have real power and desire real growth in their investments and when other stakeholders feel sidelined. Areas for further research on corporate governance and compensation with respect to processes of governance, executive remuneration and financial reporting are also investigated. The researcher used a very simple purposive sample interview survey methodology in this research.