CEO remuneration: Australian evidence of the influence of reputation, performance and governance

The purpose of this research is threefold. Firstly, to establish that CEO professional reputation is a determinant of CEO remuneration. Secondly, to determine whether company financial performance, in particular cash flow, has any influence on CEO remuneration. Or, is there an alternative measure of company performance that is productivity, which influences CEO remuneration? Thirdly, to obtain further empirical evidence on whether there is a crisis in the current Anglo-American corporate governance structure by researching the influence, if any, that the remuneration committee and substantial shareholders have on CEO remuneration. <br><br>The methodology adopted in this research is a panel data analysis of companies in the ASX Top 200 over a three-year period from 2007 to 2009 covering the Global Financial Crisis (GFC). Data are obtained from secondary sources, in particular companies’ annual reports. <br><br>There are a number of findings from this research. CEO professional reputation has a significantly positive effect on CEO fixed remuneration. In addition, there is a significant relationship between operating cash flow as a measure of company financial performance and CEO remuneration. Also, company productivity as an alternative measure of company performance has been shown to have a significant relationship with CEO remuneration. However, corporate governance factors of remuneration committee independence and diligence, as well as the monitoring effect of substantial shareholders, in general do not have any significant relationship with CEO remuneration. <br><br>This research makes several contributions to the existing literature. It introduces a determinant of CEO remuneration which has not been researched in the past that is CEO professional reputation. In addition, it illustrates how a reputation index is constructed. Furthermore, this study identifies cash flow as a company financial performance measure which affects CEO remuneration particularly during a period of financial crisis. Last but not least, empirical evidence shows that company productivity as an alternative measure of company performance, has an influence on CEO remuneration.