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International Journal of Financial Market and Corporate Finance
2021, Vol. 1, No. 1, pp. 19–27
Copyright © 2021 BOHR Publishers
www.bohrpub.com
An Investigation into the Effect of Board Members’ Remuneration
on the Performance of Public Enterprises in Namibia
Nikodemus Angula and Africa Makasi
University of Namibia, Windhoek, Namibia, Namibia Business School
E-mail: chcangula@gmail.com/angulan@unam.edu.na; africa.makasi@yahoo.com
Abstract. The study focused on the effects of the board members’ remuneration on the performance of public enter-
prises in Namibia. The main objective of this study was to investigate the interrelationship between board members’
remuneration and the performance of the public enterprises in Namibia. The study used quantitative methods as
a research strategy. The research study used secondary data from the Ministry of public enterprises database and
primary data was gathered through structured questionnaires that were distributed to different public enterprises’
Chief executive officers in Namibia. The study focused on board members’ remuneration as representatives of the
board members for each of the 97 state-owned enterprises in Namibia. The researcher used Excel to do the regression
analysis. The researcher tested for correlation between a firm’s performance and annual salary and sitting allowance
and miscellaneous allowance. Public enterprises are divided into four tiers. The researcher made use of the average
revenue for each tier to represent the firm’s performance. A total of 75% of the respondents do not agree that there is
a relationship between the board members’ remuneration and the firms’ performance, and 17% agree that there is a
relationship between the board members’ remuneration and the firms’ performance. The study recommended that
the MPE/PEs should implement motivational strategies to improve board members’ performance hence improving
the firm’s performance.
Keywords: Effect of board members, Remuneration on performance, Public enterprises in Namibia, Board
members.
1.1 Background and context of the study
For the last couple of years, directors’ remuneration has
become a contentious issue, and the debate around this
issue has often been exacerbated during times of eco-
nomic hardships in Namibia or everywhere in the world
(Aslam et al., 2019). Aslam et al. (2019) state that in the
aftermath of the recent global crisis, general public atten-
tion was drawn towards the issue of the remuneration
for board members and directors in some firms in the
United States of America. Similarly, Mohd et al. (2018)
have revealed that there is a relationship between direc-
tors’ remunerations and firms’ financial performance in
Malaysia. Furthermore, these authors assert that directors’
remunerations have become a controversial issue. Eich-
holtz et al. (2008), after studying executive compensation
in the UK property firms found that long-term compensa-
tion is chiefly determined by absolute and relative share
performance. In the UK the statistical evidence revealed
that the effect of board member’s remuneration on firm’s
performance is equated to $4.88 billion of median mar-
ket capitalization while the mean total compensation for
top five executives is $1.17 million despite board members’
poor performance. Moreover, using a sample of 698 CEOs
and 2,609 other executives over the period 1995 to 2000,
Stathopoulos et al. (2005) found three different levels of
relationships between pay and performance for three dif-
ferent performance levels. Their results indicate that exec-
utives of extraordinarily well-performing firms receive bet-
ter remuneration than executives of mid-performing firms,
who in turn receive better remuneration than executives of
poorly performing firms. These scholars have focused par-
ticularly on CEO power and board in attempting to open
the “black-box” of what affects the executive remuneration
decisions (Mousa et al., 2017). One of the arguments pre-
sented is that CEOs are in a unique position to determine
their own compensation, based on their ability to influ-
ence board behavior. Previous studies suggest a number
of factors that potentially relate to CEO power. These fac-
tors include CEO tenure, CEO ownership, board size, firm
19
20 Nikodemus Angula and Africa Makasi
size, and board ownership (Bhasin, 2015). The researcher
found that only cash bonuses had a significant posi-
tive effect on performance of firms. In contrast, Tee and
Ab Razak (2014) examined a sample of government-linked
companies (GLCs) from 2001–2006, and found a neg-
ative relationship between directors’ remuneration and
company performance (measured by lagged return on
equity). However, Dogan and Smyth (2002) and Abdul-
lah (2006) found no evidence that directors’ remunera-
tion has an impact on firm performance. Similarly, Core
et al. (1999) reported that excess CEO compensation has
a negative association with stock returns and operating
performance.
1.2 Statement of the problem
Over the years in Namibia, the government initiated differ-
ent measures to boost the performance of board members
in the country through the provision of financial resources,
amendments and enactments of new laws (Limbo, 2019).
With over ninety-seven (97) state-owned enterprises under
the stewardship of the Ministry of Public Enterprises, the
performance of the enterprises has seen erratic statistics
on poor performance despite high board members’ perks.
This is despite government efforts to drive growth by offer-
ing above market board members’ remuneration.
As a result, the ensuing debate has been on board mem-
bers’ remuneration which has not been empirically investi-
gated to establish the link between high remuneration and
enterprise performance (Mohd et al., 2018). The poor per-
formance of some public enterprises with highly remuner-
ated executives begs the question of whether remuneration
can be used to spur the growth of public enterprises in
Namibia. Therefore, the purpose of the current study was
to investigate the interrelationship between board mem-
bers’ remuneration and the performance of the enterprise
they are mandated to direct.
1.3 Main research objective
and sub-objectives
• The main objective of the study was to investigate
the relationship between board members’ remuner-
ation and the performance of public enterprises in
Namibia.
The study’s specific objectives were as follows:
• To determine the effects of board members’ annual
pay and the effect on the performance of Namibian
public enterprises;
• To evaluate the effects of sitting allowances on the per-
formance of Namibian public enterprises; and
• To examine the effects of miscellaneous allowances on
the performance of Namibian public enterprises
1.4 Research questions/hypotheses
In line with the above objectives, the three hypotheses of
this study were:
H0: There is no relationship between board members’
annual pay and the performance of public enterprises in
Namibia.
HA1: There is a relationship between board members’
annual pay and the performance of public enterprises in
Namibia.
H0: There is no relationship between sitting allowances
allocated to board members and the performance of public
enterprises in Namibia.
HA2: There is a relationship between sitting allowances
allocated to board members and the performance of public
enterprises in Namibia.
H0: There is no relationship between miscellaneous
allowances offered and the performance of public enter-
prises in Namibia.
HA3: There is a relationship between miscellaneous
allowances offered and the performance of public enter-
prises in Namibia.
1.5 The study research model
The research model for this study was represented by the
simple linear regression model:
Y = β0 + β1 X1 + β2 X2 + β3 X3; where Y = Firm per-
formance, X1 = annual salary; X2 = sitting allowances;
X3 = miscellaneous allowances; β = gradient of the slope;
β0 = intercept of the graph on the y-axis; Y is the outcome
variable and from X1 to X3 represents the independent
variables.
1.6 Research justification/significance
of the study
The study practically contributes significantly towards
resolving the protracted problem about the board members
who get remunerated without linkages to their perfor-
mance. This research has a strong scholarly significance
in that it contributes to the body of literature on board
members’ remuneration and enterprise remuneration in
Namibia. Besides, future researchers may find the results
of the present study helpful in stimulating further research.
1.7 Delimitations
The research was conducted in Windhoek alone. The study
focussed on CEOs’ remuneration as representatives of
the board members for each of the 97 public enterprises.
A study by Alqatan, Chbib, and Hussainey (2019) also used
the CEO as a representative of board members and as such,
the CEO was used as a proxy of all board members in the
current study as well.
An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 21
2 Methodology
2.1 Research design
The study used quantitative methods as a research strat-
egy. Quantitative methods were used because it enabled
the study to understand and explain phenomena according
to numerical data which were analysed using mathemat-
ically based methods, especially statistics (Yilmaz, 2013).
The study employed a cross-sectional survey design pri-
marily because this enabled the study to deal with infor-
mation about different individuals (or aggregates such
as Public Enterprises’ performance and board members’
remuneration) at the same point of time or during the same
period, in this case secondary data that was collected at the
Ministry of Public Enterprises’ database.
The study used cross-sectional survey design as an
overall strategy that the research study chose to integrate
using the different components of the study coherently
and logically, thereby ensuring that the research study
has effectively addressed the research problem. Besides,
the research design is the overall plan for connecting the
conceptual research problems to the pertinent empirical
research (Van Wyk, 2015).
Besides, cross-sectional survey design was used to guide
what data is required, what methods are going to be used
to collect and analyse this data, and how all of this is
going to answer the study research questions, that is, both
data and methods, and how these was configured in the
research project. Research design paves way for philo-
sophical assumptions, strategies for inquiry and specific
methods (Abdullah Kamal, 2019).
2.2 Population
Namibia has many public enterprises, totalling 97 at
the present. This study covered all public enterprises in
Namibia as captured in the Ministry of Public Enterprises’
database. The population therefore for this study consisted
of all the board member’s as captured by the Ministry of
Public Enterprises.
The study population was selected because this enabled
the study to engage the entire group of people, events or
things of interest that the researcher wishes to investigate
in this case the effect of board members’ remuneration on
the performance of public enterprises in Namibia (Bougie,
2013). For this study, researcher ensured that the popula-
tion selected was of those to whom the research question
applies to (Blanche et al., 2006).
The study defined the population which enabled the
researcher to understand generally a large collection of
individuals or objects that was the main focus of a scientific
query (Asiamah et al., 2017). The study general popula-
tion was probably what is universally known and specified
by researchers, though it makes little sense without being
specified alongside the target and accessible population
(Asiamah et al., 2017).
2.3 Sample
The study sample size was drawn based on, Krejcie and
Morgan (1970) table which enabled the study to select 97
public enterprises as an effective method of determining
sample size.
The study used systematic sampling since both sec-
ondary and primary data was used in this study. System-
atic sampling was used because it enabled the researcher
to choose the first element in the sample at random, then
the next elements were chosen at random.
The study sampling was defined since this enabled the
researcher to identify a group of people, objects or items
that were taken from a large population for a measure-
ment and should be representative of the population to
ensure that the research can generalise the findings from
the research sample to the population as a whole. Sam-
pling is the act, process, or technique of selecting a suitable
sample, or a representative part of a population to deter-
mine parameters or characteristics of the whole population
(Mujere, 2016).
2.4 Research instruments
The study employed a structured questionnaire to gather
quantitative data from the Ministry of Public Enterprises.
A structured questionnaire was used primarily because it
symbolises a set of standardised questions with a fixed
scheme, which specifies the exact wording and order of
the questions for gathering information from respondents.
The research study employed the data collection method
of using secondary data from the MPE database and pri-
mary data was gathered through structured questionnaires
that were distributed to different public enterprises’ CEOs
in Namibia. The secondary data captured by the Ministry
of Public Enterprises was used and primary data was also
gathered through structured questionnaires that were dis-
tributed to different public enterprises’ CEOs in Namibia.
The data within this thesis consists of secondary data
gathered from the database of the MPE and data col-
lected from the questionnaire that was filled by CEOs of
the public enterprises. Secondary data analysis is a term
that is used for the re-analysis of previously collected and
analysed data and this is one of the widely used data collec-
tion techniques in social science research (Vartanian, 2011).
Secondary data involves using data gathered by other
researchers usually for a different purpose. Vartanian
(2011) defines it as the reanalysis of previously collected
and analysed data. Secondary data analysis is the analy-
sis of data by researchers who were not involved when the
data was collected (Vartanian, 2011).
22 Nikodemus Angula and Africa Makasi
2.5 Procedure
Quantitative data was collected through distributing
Google form link which was shared with the Ministry of
Public Enterprises and different Public Enterprises target
participants. Due to Covid-19 online structured question-
naires were distributed to the participants through an
online platform.
The researcher explained the purpose and nature of
the study to the participants prior to their participation.
As stated in the research design section, the research was
carried out at the Ministry of Public Enterprises in Namibia
and at every public enterprise in Namibia. Research clear-
ance was sought from the Ministry of Public.
Enterprises to access secondary data. The study was
undertaken to solve the currently existing problems in
the work setting and to generate new knowledge in a
particular area (Bist, 2015). These new horizons of knowl-
edge obtained by research are useful to analyse and verify
the existing phenomena of society. Knowledge which is
used to build a theory develops policies, support decision-
making and solve problems.
2.6 Data analysis
The data analysis was done using statistical data analysis
tools such as SPSS and Excel. The regression analysis was
used to model the relationship between board members’
remuneration and firm performance. The effects of depen-
dent variables which were annual salary, sitting allowances
and miscellaneous allowances, and how they interact with
each other were explored based on the hypothesised rela-
tionships. The research model for this study was repre-
sented by the simple linear regression model:
Y = β0 + β1 X1 + β2 X2 + β3 X3; where Y = Firm per-
formance, X1 = annual salary; X2 = sitting allowances;
X3 = miscellaneous allowances; β = gradient of the slope;
β0 = intercept of the graph on the y-axis; Y is the outcome
variable and from X1 to X3 represents the independent
variables.
For the purpose of this study, data were analysed based
on the above research model which enabled the study to
follow the data analysis step by gathering data and statis-
tically analysed the data to see if the hypotheses that were
generated have been supported (Bougie, 2013). The study
ensured that the process of data cleaning, transforming,
and modelling data to discover useful information for
business decision-making was done. The purpose of data
analysis is to extract useful information from data and
make the decision based upon the data analysis. Data
analysis entails examining, categorising and summarising
information in order to establish meaning and maintain
evidence (Schoenbach, 2014). Schoenbach (2014) further
states that the analysis process is managed by organis-
ing, summarising and interpreting data. The SPSS Software
was employed to analyse quantitative data. This approach
was selected because it is a research standardised approach
that comprises steps on how the data collected should be
analysed.
2.7 Research ethics
Permission to conduct the study was sought from the Min-
istry of Public Enterprises and the University of Namibia
to ensure professional and ethical behaviour as well as
the protection of respondents. Data was stored/kept con-
fidential and used for the study and publications only.
Data will be destroyed after 5 years through formatting the
encrypted USB where data gathered is kept.
The study ensured that the moral codes were abided
throughout the process of conducting the research. This
means during the process of conducting the study, the
researcher was governed by the moral codes which
enabled the study to distinguish between right and wrong
when conducting a research (Akaranga and Makau, 2016).
The study ensured that no person’s rights were violated in
any manner during the research study. Explanations about
the nature of the study were highlighted to the participants
before participation. Anonymity and confidentiality were
treated in absolute confidence during the research study
process.
The study ensured that no person’s rights were violated
in any manner during the research study. Explanations
about the nature of the study were highlighted to the
participants before participation. Anonymity and confi-
dentiality were treated in absolute confidence during the
research study process. The study ensured participants
were not exposed to unnecessary physical or psychologi-
cal harm (Leedy and Ormrod, 2010).
3 Literature Review
3.1 The effects of board members’ annual pay
on a firm’s performance
The positive relationship between executive remuneration
and firm performance has remained strong among sev-
eral empirical studies (Lewellen et al., 1992; Carpenter
and Wade, 2002; Leonard, 1990). Lewellen et al. (1992)
found that there is a positive relationship between execu-
tive compensation and firm performance. They concluded
that those firms which pay better will perform better. There
is some evidence that higher levels of pay are associ-
ated with executive human capital (Carpenter and Sanders,
2002). According to Hogan and Mc Pheters (1980), firms
that acquired better and higher skills levels of executives
requested a higher pay in labor markets. Michaud and
Gai (2009) hypothesized that directors such as CEOs who
received higher pay tend to work harder and then succeed
to improve the firm’s financial performance.
An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 23
The study done by Shao et al. (2012) found that there
is a positive relationship to the board of director’s remu-
neration when there is a change in fair value (CFV). The
study was conducted in China. Similarly, Hallock et al.
(2010) in the U.S found that low-conditional-wage CEOs
may not be as profitable for the firm. Furthermore, Brick
et al. (2006) found a weak positive relationship between the
remuneration of (Directors and CEOs) and performance
in Cronyism. The study done by Girma et al. (2007) and
Haron (2018) found a weak relationship between pay and
performance in the UK and Malaysia, respectively. Besides,
Fernandes (2008) conducted a study in Portuguese and
found that the executive director’s remuneration has an
insignificant relationship with the company performance.
Scholtz and Smit (2012) also found that executive director
pay with the performance sensitivity is stronger for equity-
based pay rather than for cash-based remuneration.
3.2 The effects of sitting allowances on firm’s
performance
The study was done by Hendry and Kiel, (2004) pointed
that CEO/board director’s remuneration is positively
related to the firm performance in some firm in the U.S.
Similarly, Gregory-Smith, (2012) state that stewardship
theory plays a significant role in the selection of board
compensation to enhance the firm performance. Further-
more, the stewardship framework empowers the lower-
level individuals at the boardroom level to work harder
to secure the title of CEO including the related remuner-
ation bundles as a reward. The study done by Zhang et al.
(2008) pointed out that CEOs incentives with risk-taking
behaviour boost the operational performance of the firms.
Similarly, Conyon and Sadler (2001) in their studies con-
ducted in the UK found a weak relationship between the
executive director pay and performance in the UK because
firms at that time faced severe problems.
3.3 The effects of miscellaneous allowances
on firm’s performance
Murphy (1985) examined 72 U.S firms from 1964 to 1981
and found a strong positive correlation between execu-
tive compensation and firm performance (measured by
shareholders’ return and realized growth in sales). Jensen
and Murphy (2004) added that the immediacy and tan-
gibility of cash awards can provide stronger incentives
than uncertain paper gains in equity plans. Bruck et al.
(2008) concluded that the executive payment positively
relates to the past and current firm financial performance.
In contrast, Kutum (2015) found no significant relationship
exists between CEO remuneration and bank performance
in Canadian Banks except a weak positive relationship
with return on assets (ROA). There is also a lack of consis-
tency and mixed results in Malaysia. Additionally, all these
studies focused on non-financial firms. Jaafar et al. (2012),
who focused on family-owned companies, found directors’
remuneration has a positive relationship with firm perfor-
mance. Similar results were obtained by Syaiful, Effiezal
and James (2012), they found that in Malaysian fam-
ily firms, directors’ remuneration significantly affects the
board motivation in improving firm performance. Direc-
tors’ remuneration being significantly related to ROA have
been supported by (Yatim, 2012). In addition, a study by
Hassan et al. (2003) on Malaysia firms’ performance before
and during the Asian financial crisis (i.e., 1996 to 1998)
found a weak positive relationship between director remu-
neration and firm performance.
The study done by Sheikh et al. (2018) found a positive
link between the CEOs and board of directors’ compen-
sation with the firm performance. Similarly, Conyon and
Sadler (2001) in their studies found a weak relationship
between the executive director pay and performance in the
UK. Jensen, Murphy, and Wruck (2004) state that incentives
given to executives tend to mitigate the agency problem
and enhance firm performance. Doucouliagos et al. (2007)
state that the pay-performance framework strongly sup-
ports the agency theory approach whereby the board of
directors and CEOs are compensated for their prior level
firm performance. Similarly, Scholtz and Smit (2012) found
that the performance – pay framework weakly support the
notion of stewardship and tournament theory, whereby the
board of directors and CEOs perform better in the future,
on the basis of prior amounts and structure of remunera-
tion packages.
3.4 Board member’s remuneration and firm
performance
The remuneration paid to the board of directors repre-
sents their rewards which usually includes: salaries, fees,
defined contributions and benefits in kind. Erick et al.
(2014) note that these rewards could be in the form of
financial, non-financial and psychological payments that
an organisation provides for its board of directors. These
rewards are intended to attract new personnel to the organ-
isation, stimulate good work performance and maintain
a commitment to the organisation. Direct remuneration
is that which is received by the directors periodically
(usually monthly) in the form of basic salary, over-
time allowance, commission, merit pay, leave allowance,
bonuses and company profit-sharing. Indirect pay, often
called benefits-in-kind, could be in the form of health and
life insurance cover, retirement and pension plans, com-
pany car, health care, health club memberships, mobile
phone, subsidized meals and subsidized entertainment
(Koala Consulting and Training, 2008). Directors’ remu-
neration is invariably and closely linked to the issue of
corporate governance. Good and sound corporate gover-
nance should constrain excessive payments being made to
24 Nikodemus Angula and Africa Makasi
directors and remuneration should be largely determined
by the firm’s performance. Nonetheless, no prescription
on how to determine the directors’ remuneration is pro-
vided by corporate governance principles or best practices
(Miyienda et al., 2013). Rather, the board, through the
remuneration committee, should design a remuneration
package that is capable of attracting and retaining exec-
utive directors of good calibre. Executive remuneration
represents a severe problem in the global financial world,
with numerous investors, shareholders, and the public
becoming outspoken about the levels of remuneration
of directors (Olurotimi, 2019). Particularly in the spot-
light are companies that disclose poor performance, but
whose executives still receive excessive remuneration, and
dismissed board members who receive large severance
packages (Dommisse, 2011).
4 Discussion of Results
4.1 Response rate
4.2 Test for instrument reliability
The study used Cronbach’s alpha test to enable the
researcher measuring the internal consistency or reliability
between several items, measurements or ratings. The Cron-
bach’s alpha test was primarily used in this study because
it is usually applied to test the consistency and stability
of the questionnaires which measure latent variables as a
score to be between 0.7 and 1 (Taber, 2018).
The researcher made use of the MPE database to collect
data and primary data was gathered through structured
questionnaires that were distributed to different public
enterprises’ CEOs in Namibia. This was secondary data
and primary data. The researcher checked if the documents
had been checked and signed off as passed hence they
are valid. The database and structured questionnaires were
checked by auditors and they were signed off as passed
hence making the information collected from the database
valid. The data collected was the same hence it was found
to be reliable to be used.
4.3 Test for sample adequacy
The researcher made use of the Kaiser-Meyer-Olkin test
to test for sampling adequacy. The KMO value was 0.85
which indicated that the sampling was adequate.
The p-value 0.201528 is greater than the significant
level 0.05 which means that these variables are statistically
insignificant. The adjusted R square 0.878 means that 88%
of dependent variable y can be explained by the entire set
of independent variables annual salary, sitting allowance
and miscellaneous allowance. Since the p-value is greater
than the significant value, it becomes useless to go on and
interpret the singular p values and the coefficients. We can
safely accept the null hypothesis that there is no relation-
ship between the firm’s performance and annual salary,
sitting allowance and miscellaneous allowance.
4.4 Test for normality
The normality test was done and the significance was 0.15
and from this significance, we can safely conclude that the
sample is normally distributed.
Table 1. Summary output.
Regression Statistics
Multiple R 0.979483
R Square 0.959386
Adjusted R Square 0.878159
Standard Error 77886547
Observations 4
ANOVA
Df SS MS F Significance F
Regression 2 1.43E + 17 7.17E + 16 11.81116 0.201528
Residual 1 6.07E + 15 6.07E + 15
Total 3 1.49E + 17
Standard Lower Upper Lower Upper
Coefficients Error t Stat P-value 95% 95% 95.0% 95.0%
Intercept 5.85E + 08 1.42E + 08 4.134035 0.151092 −1.2E + 09 2.38E + 09 −1.2E + 09 2.38E + 09
Annual salary 905.7209 870.3658 1.040621 0.487329 −10153.3 11964.77 −10153.3 11964.77
Sitting and −65308.3 37576.34 −1.73802 0.332386 −542761 412144.4 −542761 412144.4
miscellaneous allowance
An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 25
4.5 Summary of findings
Demographic characteristics
Out of the CEOs from the 97 public enterprises that were
the participants for the research, 58 were male and 12 were
female. This data revealed that most of the executive mem-
bers of the public enterprises in Namibia are men. The bar
graph below was used to present this data.
The ages of the participants were as follows.
Out of the 70 participants, 7 were between the ages of
26–35, 22 were in between the ages of 36–45 and 41 were
above 46. Most of the participants were above 45 years old.
This revealed that mature and older CEOs are employed in
public enterprises.
The participants were asked to indicate if there is a rela-
tionship between board members’ remuneration and the
firms’ performance and their responses were as follows.
A total of 75% of the respondents do not agree that there
is a relationship between the board members’ remunera-
tion and the firms’ performance, though 17% agree that
there is a relationship between the board members’ remu-
neration and the firms’ performance.
What are the factors that influence board members’
annual pay which further affect the performance of
Namibian public enterprises?
The respondents were asked to state the factors that influ-
ence board members’ annual pay which further affect the
Figure 1. Demographic characteristics of genders.
Figure 2. Demographic characteristics of age groups.
Figure 3. Board member’s remuneration and firm’s performance.
Figure 4. Factors affecting board members annual pay.
performance of public enterprises and their responses are
presented below.
Based on the findings, it can be revealed that board
members’ annual pay is affected by the size of the firm,
Return on assets (ROA), and Return on investments (ROI).
However, most of the respondents indicated that the board
member’s annual pay is influenced by the return on invest-
ments. If the return on investment is high, it means that the
income levels of board members are increased.
What are the effects of sitting allowances on the perfor-
mance of Namibian public enterprises?
The respondents were asked to indicate the effects of sit-
ting allowances on the performance of public enterprises
and their responses are presented below. The respondents
indicated that sitting allowance has a negative impact
on performance. They argued that it slows down the
operations of the government. When board members are
26 Nikodemus Angula and Africa Makasi
given allowances for attending meetings and training pro-
grammes, they will divert their focus from their duties
to attending training programmes hence slowing down
the operations of the business. Because of the incentive
one gets from attending a meeting or training programme,
wrong people are sent to attend these meetings. Sometimes
a meeting might require a lower level worker or manager
but because of the incentive attached to the meeting the
board members might go themselves instead hence the
wrong person receives the training and this affects the per-
formance of the business.
Sitting allowances creates unnecessary pressure and
opportunities for fraud. Board members can become fraud-
ulent because of this incentive which then affects the
smooth running of the organisation. The intrinsic moti-
vation of board members is reduced hence individual
performance is reduced thereby affecting the performance
of the organisation.
The study sought to test the following hypothesis:
• H0: There is no relationship between board members’
annual pay and the performance of public enterprises
in Namibia.
• HA1: There is a relationship between board members’
annual pay and the performance of public enterprises
in Namibia.
• H0: There is no relationship between sitting
allowances allocated to board members and the
performance of public enterprises in Namibia.
• HA2: There is a relationship between sitting
allowances allocated to board members and the
performance of public enterprises in Namibia.
• H0: There is no relationship between miscellaneous
allowances offered and the performance of public
enterprises in Namibia.
• HA3: There is a relationship between miscellaneous
allowances offered and the performance of public
enterprises in Namibia.
The table below provides a summary of the findings:
Table 2. Summary of findings.
Hypothesis Findings
Decision
(Accept/
Reject)
H1 The present study found that that there is no
relationship between a firm’s performance
and the board member’s annual salary, sitting
allowance and miscellaneous allowance.
Accept
H2 The present study found that the effects of
miscellaneous allowances on the firm’s
performance have a positive effect on the
firm’s performance.
Accept
H3 The present study found that miscellaneous
allowances have a negative impact on the
performance of public enterprises.
Reject
5 Conclusion
From the presented data it was revealed that there is no
relationship between a firm’s performance and the board
member’s annual salary, sitting allowance and miscella-
neous allowance. These independent variables have no
influence at all on the performance of a firm. A firm can
perform very well regardless of the board member’s remu-
neration. Board members can receive high salaries and
allowances but the firm might not perform well. There are
other factors other than the board member’s salary, sitting
and miscellaneous allowance that cause a change in the
firm’s performance. The study findings revealed that out of
the CEOs from the 97 public enterprises that were the par-
ticipants for the research, 58 were male and 12 were female.
This data revealed that most of the executive members of
the public enterprises in Namibia are men.
Furthermore, the study finds that a total of 75% of
the respondents do not agree that there is a relationship
between the board members’ remuneration and the firms’
performance, though 17% agree that there is a relation-
ship between the board members’ remuneration and the
firms’ performance. The respondents indicated that sitting
allowance has a negative impact on performance. They
argued that it slows down the operations of the gov-
ernment. When board members are given allowances for
attending meetings and training programmes, they will
divert their focus from their duties to attending train-
ing programmes hence slowing down the operations of
the business. The study findings also indicated that the
respondents were asked to indicate the effects of miscel-
laneous allowances on the firm’s performance and the
findings revealed that the researcher can safely conclude
that miscellaneous allowances have a positive effect on the
firm’s performance. Miscellaneous allowance motivates
board members to improve their performance which in
turn improves the performance of the organisation. How-
ever, some of the respondents revealed that miscellaneous
allowances have a negative impact on the performance of
public enterprises. The study findings further indicated
that the respondents were asked to fill in the Likert scale.
The respondents revealed that they are not sure if the
increase in board members’ remuneration motivates board
members hence improving the performance of an organi-
sation.
References
Aslam, E., Haron, R., and Naveed, M. (2019). How director remuneration
impacts firm performance. Retrieved from https://doi.org/10.1016/j.
bir.2019.01.003.
Bhasin, M. L. (2015). Corporate accounting fraud: A case study of Satyam
Computers Limited.
Bhasin, M. L. (2015). Corporate accounting fraud: A case study of Satyam
Computers Limited.
An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 27
Dogan, E., and Smyth, R. (2002). Board Remuneration, Company Per-
formance, and Ownership Concentration: Evidence from Pub-
licly Listed Malaysian Companies. Asian Economic Bulletin, 19(3),
319–347.
Eichholtz, P., Kok, N., and Otten, R. (2008). Executive compensation in UK
property companies. The Journal of Real Estate Finance and Economics,
36, 405–426.
Erick, T. K., Kefah, B. A., and Nyaoga, R. B. (2014). The relationship between
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hp/RJFA/article/view/10459.
Limbo, C. M. (2019). An analysis of the performance of state-owned enterprises
in Namibia: Case studies in the transport sector. Retrieved from https:
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MohdRazali, M. W., Yee, N. S., Hwang, J. Y. T., Tak, A. H. Bin, N., and
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study on Malaysian listed firms under consumer product industry.
International Business Research, 11(5), 102–109. Retrieved from https:
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MohdRazali, M. W., Yee, N. S., Hwang, J. Y. T., Tak, A. H. Bin, N., and
Kadri, N. (2018). Directors’ remuneration and firm’s performance: A
study on Malaysian listed firms under consumer product industry.
International Business Research, 11(5), 102–109. Retrieved from https:
//doi.org/10.5539/ibr.v11n5p102.
Mousa, F., Chowdhury, J., and Gallagher, S. R. (2017). The Implications
of CEO Power on the Relationship between Firm Resources and
Innovation. In Academy of Management Proceedings (Vol. 2017, No. 1,
p. 17132). Briarcliff Manor, NY 10510: Academy of Management.
Mousa, F., Chowdhury, J., and Gallagher, S. R. (2017). The Implications
of CEO Power on the Relationship between Firm Resources and
Innovation. In Academy of Management Proceedings (Vol. 2017, No. 1,
p. 17132). Briarcliff Manor, NY 10510: Academy of Management.
Schoenbach, V. J. (2014). Concepts and techniques for managing, editing, ana-
lyzing and interpreting data from epidemiologic studies. Retrieved from
http://www.epidemiolog.net/evolving/DataAnalysis-and-interp
retation.pdf.
Yatim, P. (2012). Boardroom pay, performance and corporate governance
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An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises in Namibia

  • 1. International Journal of Financial Market and Corporate Finance 2021, Vol. 1, No. 1, pp. 19–27 Copyright © 2021 BOHR Publishers www.bohrpub.com An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises in Namibia Nikodemus Angula and Africa Makasi University of Namibia, Windhoek, Namibia, Namibia Business School E-mail: chcangula@gmail.com/angulan@unam.edu.na; africa.makasi@yahoo.com Abstract. The study focused on the effects of the board members’ remuneration on the performance of public enter- prises in Namibia. The main objective of this study was to investigate the interrelationship between board members’ remuneration and the performance of the public enterprises in Namibia. The study used quantitative methods as a research strategy. The research study used secondary data from the Ministry of public enterprises database and primary data was gathered through structured questionnaires that were distributed to different public enterprises’ Chief executive officers in Namibia. The study focused on board members’ remuneration as representatives of the board members for each of the 97 state-owned enterprises in Namibia. The researcher used Excel to do the regression analysis. The researcher tested for correlation between a firm’s performance and annual salary and sitting allowance and miscellaneous allowance. Public enterprises are divided into four tiers. The researcher made use of the average revenue for each tier to represent the firm’s performance. A total of 75% of the respondents do not agree that there is a relationship between the board members’ remuneration and the firms’ performance, and 17% agree that there is a relationship between the board members’ remuneration and the firms’ performance. The study recommended that the MPE/PEs should implement motivational strategies to improve board members’ performance hence improving the firm’s performance. Keywords: Effect of board members, Remuneration on performance, Public enterprises in Namibia, Board members. 1.1 Background and context of the study For the last couple of years, directors’ remuneration has become a contentious issue, and the debate around this issue has often been exacerbated during times of eco- nomic hardships in Namibia or everywhere in the world (Aslam et al., 2019). Aslam et al. (2019) state that in the aftermath of the recent global crisis, general public atten- tion was drawn towards the issue of the remuneration for board members and directors in some firms in the United States of America. Similarly, Mohd et al. (2018) have revealed that there is a relationship between direc- tors’ remunerations and firms’ financial performance in Malaysia. Furthermore, these authors assert that directors’ remunerations have become a controversial issue. Eich- holtz et al. (2008), after studying executive compensation in the UK property firms found that long-term compensa- tion is chiefly determined by absolute and relative share performance. In the UK the statistical evidence revealed that the effect of board member’s remuneration on firm’s performance is equated to $4.88 billion of median mar- ket capitalization while the mean total compensation for top five executives is $1.17 million despite board members’ poor performance. Moreover, using a sample of 698 CEOs and 2,609 other executives over the period 1995 to 2000, Stathopoulos et al. (2005) found three different levels of relationships between pay and performance for three dif- ferent performance levels. Their results indicate that exec- utives of extraordinarily well-performing firms receive bet- ter remuneration than executives of mid-performing firms, who in turn receive better remuneration than executives of poorly performing firms. These scholars have focused par- ticularly on CEO power and board in attempting to open the “black-box” of what affects the executive remuneration decisions (Mousa et al., 2017). One of the arguments pre- sented is that CEOs are in a unique position to determine their own compensation, based on their ability to influ- ence board behavior. Previous studies suggest a number of factors that potentially relate to CEO power. These fac- tors include CEO tenure, CEO ownership, board size, firm 19
  • 2. 20 Nikodemus Angula and Africa Makasi size, and board ownership (Bhasin, 2015). The researcher found that only cash bonuses had a significant posi- tive effect on performance of firms. In contrast, Tee and Ab Razak (2014) examined a sample of government-linked companies (GLCs) from 2001–2006, and found a neg- ative relationship between directors’ remuneration and company performance (measured by lagged return on equity). However, Dogan and Smyth (2002) and Abdul- lah (2006) found no evidence that directors’ remunera- tion has an impact on firm performance. Similarly, Core et al. (1999) reported that excess CEO compensation has a negative association with stock returns and operating performance. 1.2 Statement of the problem Over the years in Namibia, the government initiated differ- ent measures to boost the performance of board members in the country through the provision of financial resources, amendments and enactments of new laws (Limbo, 2019). With over ninety-seven (97) state-owned enterprises under the stewardship of the Ministry of Public Enterprises, the performance of the enterprises has seen erratic statistics on poor performance despite high board members’ perks. This is despite government efforts to drive growth by offer- ing above market board members’ remuneration. As a result, the ensuing debate has been on board mem- bers’ remuneration which has not been empirically investi- gated to establish the link between high remuneration and enterprise performance (Mohd et al., 2018). The poor per- formance of some public enterprises with highly remuner- ated executives begs the question of whether remuneration can be used to spur the growth of public enterprises in Namibia. Therefore, the purpose of the current study was to investigate the interrelationship between board mem- bers’ remuneration and the performance of the enterprise they are mandated to direct. 1.3 Main research objective and sub-objectives • The main objective of the study was to investigate the relationship between board members’ remuner- ation and the performance of public enterprises in Namibia. The study’s specific objectives were as follows: • To determine the effects of board members’ annual pay and the effect on the performance of Namibian public enterprises; • To evaluate the effects of sitting allowances on the per- formance of Namibian public enterprises; and • To examine the effects of miscellaneous allowances on the performance of Namibian public enterprises 1.4 Research questions/hypotheses In line with the above objectives, the three hypotheses of this study were: H0: There is no relationship between board members’ annual pay and the performance of public enterprises in Namibia. HA1: There is a relationship between board members’ annual pay and the performance of public enterprises in Namibia. H0: There is no relationship between sitting allowances allocated to board members and the performance of public enterprises in Namibia. HA2: There is a relationship between sitting allowances allocated to board members and the performance of public enterprises in Namibia. H0: There is no relationship between miscellaneous allowances offered and the performance of public enter- prises in Namibia. HA3: There is a relationship between miscellaneous allowances offered and the performance of public enter- prises in Namibia. 1.5 The study research model The research model for this study was represented by the simple linear regression model: Y = β0 + β1 X1 + β2 X2 + β3 X3; where Y = Firm per- formance, X1 = annual salary; X2 = sitting allowances; X3 = miscellaneous allowances; β = gradient of the slope; β0 = intercept of the graph on the y-axis; Y is the outcome variable and from X1 to X3 represents the independent variables. 1.6 Research justification/significance of the study The study practically contributes significantly towards resolving the protracted problem about the board members who get remunerated without linkages to their perfor- mance. This research has a strong scholarly significance in that it contributes to the body of literature on board members’ remuneration and enterprise remuneration in Namibia. Besides, future researchers may find the results of the present study helpful in stimulating further research. 1.7 Delimitations The research was conducted in Windhoek alone. The study focussed on CEOs’ remuneration as representatives of the board members for each of the 97 public enterprises. A study by Alqatan, Chbib, and Hussainey (2019) also used the CEO as a representative of board members and as such, the CEO was used as a proxy of all board members in the current study as well.
  • 3. An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 21 2 Methodology 2.1 Research design The study used quantitative methods as a research strat- egy. Quantitative methods were used because it enabled the study to understand and explain phenomena according to numerical data which were analysed using mathemat- ically based methods, especially statistics (Yilmaz, 2013). The study employed a cross-sectional survey design pri- marily because this enabled the study to deal with infor- mation about different individuals (or aggregates such as Public Enterprises’ performance and board members’ remuneration) at the same point of time or during the same period, in this case secondary data that was collected at the Ministry of Public Enterprises’ database. The study used cross-sectional survey design as an overall strategy that the research study chose to integrate using the different components of the study coherently and logically, thereby ensuring that the research study has effectively addressed the research problem. Besides, the research design is the overall plan for connecting the conceptual research problems to the pertinent empirical research (Van Wyk, 2015). Besides, cross-sectional survey design was used to guide what data is required, what methods are going to be used to collect and analyse this data, and how all of this is going to answer the study research questions, that is, both data and methods, and how these was configured in the research project. Research design paves way for philo- sophical assumptions, strategies for inquiry and specific methods (Abdullah Kamal, 2019). 2.2 Population Namibia has many public enterprises, totalling 97 at the present. This study covered all public enterprises in Namibia as captured in the Ministry of Public Enterprises’ database. The population therefore for this study consisted of all the board member’s as captured by the Ministry of Public Enterprises. The study population was selected because this enabled the study to engage the entire group of people, events or things of interest that the researcher wishes to investigate in this case the effect of board members’ remuneration on the performance of public enterprises in Namibia (Bougie, 2013). For this study, researcher ensured that the popula- tion selected was of those to whom the research question applies to (Blanche et al., 2006). The study defined the population which enabled the researcher to understand generally a large collection of individuals or objects that was the main focus of a scientific query (Asiamah et al., 2017). The study general popula- tion was probably what is universally known and specified by researchers, though it makes little sense without being specified alongside the target and accessible population (Asiamah et al., 2017). 2.3 Sample The study sample size was drawn based on, Krejcie and Morgan (1970) table which enabled the study to select 97 public enterprises as an effective method of determining sample size. The study used systematic sampling since both sec- ondary and primary data was used in this study. System- atic sampling was used because it enabled the researcher to choose the first element in the sample at random, then the next elements were chosen at random. The study sampling was defined since this enabled the researcher to identify a group of people, objects or items that were taken from a large population for a measure- ment and should be representative of the population to ensure that the research can generalise the findings from the research sample to the population as a whole. Sam- pling is the act, process, or technique of selecting a suitable sample, or a representative part of a population to deter- mine parameters or characteristics of the whole population (Mujere, 2016). 2.4 Research instruments The study employed a structured questionnaire to gather quantitative data from the Ministry of Public Enterprises. A structured questionnaire was used primarily because it symbolises a set of standardised questions with a fixed scheme, which specifies the exact wording and order of the questions for gathering information from respondents. The research study employed the data collection method of using secondary data from the MPE database and pri- mary data was gathered through structured questionnaires that were distributed to different public enterprises’ CEOs in Namibia. The secondary data captured by the Ministry of Public Enterprises was used and primary data was also gathered through structured questionnaires that were dis- tributed to different public enterprises’ CEOs in Namibia. The data within this thesis consists of secondary data gathered from the database of the MPE and data col- lected from the questionnaire that was filled by CEOs of the public enterprises. Secondary data analysis is a term that is used for the re-analysis of previously collected and analysed data and this is one of the widely used data collec- tion techniques in social science research (Vartanian, 2011). Secondary data involves using data gathered by other researchers usually for a different purpose. Vartanian (2011) defines it as the reanalysis of previously collected and analysed data. Secondary data analysis is the analy- sis of data by researchers who were not involved when the data was collected (Vartanian, 2011).
  • 4. 22 Nikodemus Angula and Africa Makasi 2.5 Procedure Quantitative data was collected through distributing Google form link which was shared with the Ministry of Public Enterprises and different Public Enterprises target participants. Due to Covid-19 online structured question- naires were distributed to the participants through an online platform. The researcher explained the purpose and nature of the study to the participants prior to their participation. As stated in the research design section, the research was carried out at the Ministry of Public Enterprises in Namibia and at every public enterprise in Namibia. Research clear- ance was sought from the Ministry of Public. Enterprises to access secondary data. The study was undertaken to solve the currently existing problems in the work setting and to generate new knowledge in a particular area (Bist, 2015). These new horizons of knowl- edge obtained by research are useful to analyse and verify the existing phenomena of society. Knowledge which is used to build a theory develops policies, support decision- making and solve problems. 2.6 Data analysis The data analysis was done using statistical data analysis tools such as SPSS and Excel. The regression analysis was used to model the relationship between board members’ remuneration and firm performance. The effects of depen- dent variables which were annual salary, sitting allowances and miscellaneous allowances, and how they interact with each other were explored based on the hypothesised rela- tionships. The research model for this study was repre- sented by the simple linear regression model: Y = β0 + β1 X1 + β2 X2 + β3 X3; where Y = Firm per- formance, X1 = annual salary; X2 = sitting allowances; X3 = miscellaneous allowances; β = gradient of the slope; β0 = intercept of the graph on the y-axis; Y is the outcome variable and from X1 to X3 represents the independent variables. For the purpose of this study, data were analysed based on the above research model which enabled the study to follow the data analysis step by gathering data and statis- tically analysed the data to see if the hypotheses that were generated have been supported (Bougie, 2013). The study ensured that the process of data cleaning, transforming, and modelling data to discover useful information for business decision-making was done. The purpose of data analysis is to extract useful information from data and make the decision based upon the data analysis. Data analysis entails examining, categorising and summarising information in order to establish meaning and maintain evidence (Schoenbach, 2014). Schoenbach (2014) further states that the analysis process is managed by organis- ing, summarising and interpreting data. The SPSS Software was employed to analyse quantitative data. This approach was selected because it is a research standardised approach that comprises steps on how the data collected should be analysed. 2.7 Research ethics Permission to conduct the study was sought from the Min- istry of Public Enterprises and the University of Namibia to ensure professional and ethical behaviour as well as the protection of respondents. Data was stored/kept con- fidential and used for the study and publications only. Data will be destroyed after 5 years through formatting the encrypted USB where data gathered is kept. The study ensured that the moral codes were abided throughout the process of conducting the research. This means during the process of conducting the study, the researcher was governed by the moral codes which enabled the study to distinguish between right and wrong when conducting a research (Akaranga and Makau, 2016). The study ensured that no person’s rights were violated in any manner during the research study. Explanations about the nature of the study were highlighted to the participants before participation. Anonymity and confidentiality were treated in absolute confidence during the research study process. The study ensured that no person’s rights were violated in any manner during the research study. Explanations about the nature of the study were highlighted to the participants before participation. Anonymity and confi- dentiality were treated in absolute confidence during the research study process. The study ensured participants were not exposed to unnecessary physical or psychologi- cal harm (Leedy and Ormrod, 2010). 3 Literature Review 3.1 The effects of board members’ annual pay on a firm’s performance The positive relationship between executive remuneration and firm performance has remained strong among sev- eral empirical studies (Lewellen et al., 1992; Carpenter and Wade, 2002; Leonard, 1990). Lewellen et al. (1992) found that there is a positive relationship between execu- tive compensation and firm performance. They concluded that those firms which pay better will perform better. There is some evidence that higher levels of pay are associ- ated with executive human capital (Carpenter and Sanders, 2002). According to Hogan and Mc Pheters (1980), firms that acquired better and higher skills levels of executives requested a higher pay in labor markets. Michaud and Gai (2009) hypothesized that directors such as CEOs who received higher pay tend to work harder and then succeed to improve the firm’s financial performance.
  • 5. An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 23 The study done by Shao et al. (2012) found that there is a positive relationship to the board of director’s remu- neration when there is a change in fair value (CFV). The study was conducted in China. Similarly, Hallock et al. (2010) in the U.S found that low-conditional-wage CEOs may not be as profitable for the firm. Furthermore, Brick et al. (2006) found a weak positive relationship between the remuneration of (Directors and CEOs) and performance in Cronyism. The study done by Girma et al. (2007) and Haron (2018) found a weak relationship between pay and performance in the UK and Malaysia, respectively. Besides, Fernandes (2008) conducted a study in Portuguese and found that the executive director’s remuneration has an insignificant relationship with the company performance. Scholtz and Smit (2012) also found that executive director pay with the performance sensitivity is stronger for equity- based pay rather than for cash-based remuneration. 3.2 The effects of sitting allowances on firm’s performance The study was done by Hendry and Kiel, (2004) pointed that CEO/board director’s remuneration is positively related to the firm performance in some firm in the U.S. Similarly, Gregory-Smith, (2012) state that stewardship theory plays a significant role in the selection of board compensation to enhance the firm performance. Further- more, the stewardship framework empowers the lower- level individuals at the boardroom level to work harder to secure the title of CEO including the related remuner- ation bundles as a reward. The study done by Zhang et al. (2008) pointed out that CEOs incentives with risk-taking behaviour boost the operational performance of the firms. Similarly, Conyon and Sadler (2001) in their studies con- ducted in the UK found a weak relationship between the executive director pay and performance in the UK because firms at that time faced severe problems. 3.3 The effects of miscellaneous allowances on firm’s performance Murphy (1985) examined 72 U.S firms from 1964 to 1981 and found a strong positive correlation between execu- tive compensation and firm performance (measured by shareholders’ return and realized growth in sales). Jensen and Murphy (2004) added that the immediacy and tan- gibility of cash awards can provide stronger incentives than uncertain paper gains in equity plans. Bruck et al. (2008) concluded that the executive payment positively relates to the past and current firm financial performance. In contrast, Kutum (2015) found no significant relationship exists between CEO remuneration and bank performance in Canadian Banks except a weak positive relationship with return on assets (ROA). There is also a lack of consis- tency and mixed results in Malaysia. Additionally, all these studies focused on non-financial firms. Jaafar et al. (2012), who focused on family-owned companies, found directors’ remuneration has a positive relationship with firm perfor- mance. Similar results were obtained by Syaiful, Effiezal and James (2012), they found that in Malaysian fam- ily firms, directors’ remuneration significantly affects the board motivation in improving firm performance. Direc- tors’ remuneration being significantly related to ROA have been supported by (Yatim, 2012). In addition, a study by Hassan et al. (2003) on Malaysia firms’ performance before and during the Asian financial crisis (i.e., 1996 to 1998) found a weak positive relationship between director remu- neration and firm performance. The study done by Sheikh et al. (2018) found a positive link between the CEOs and board of directors’ compen- sation with the firm performance. Similarly, Conyon and Sadler (2001) in their studies found a weak relationship between the executive director pay and performance in the UK. Jensen, Murphy, and Wruck (2004) state that incentives given to executives tend to mitigate the agency problem and enhance firm performance. Doucouliagos et al. (2007) state that the pay-performance framework strongly sup- ports the agency theory approach whereby the board of directors and CEOs are compensated for their prior level firm performance. Similarly, Scholtz and Smit (2012) found that the performance – pay framework weakly support the notion of stewardship and tournament theory, whereby the board of directors and CEOs perform better in the future, on the basis of prior amounts and structure of remunera- tion packages. 3.4 Board member’s remuneration and firm performance The remuneration paid to the board of directors repre- sents their rewards which usually includes: salaries, fees, defined contributions and benefits in kind. Erick et al. (2014) note that these rewards could be in the form of financial, non-financial and psychological payments that an organisation provides for its board of directors. These rewards are intended to attract new personnel to the organ- isation, stimulate good work performance and maintain a commitment to the organisation. Direct remuneration is that which is received by the directors periodically (usually monthly) in the form of basic salary, over- time allowance, commission, merit pay, leave allowance, bonuses and company profit-sharing. Indirect pay, often called benefits-in-kind, could be in the form of health and life insurance cover, retirement and pension plans, com- pany car, health care, health club memberships, mobile phone, subsidized meals and subsidized entertainment (Koala Consulting and Training, 2008). Directors’ remu- neration is invariably and closely linked to the issue of corporate governance. Good and sound corporate gover- nance should constrain excessive payments being made to
  • 6. 24 Nikodemus Angula and Africa Makasi directors and remuneration should be largely determined by the firm’s performance. Nonetheless, no prescription on how to determine the directors’ remuneration is pro- vided by corporate governance principles or best practices (Miyienda et al., 2013). Rather, the board, through the remuneration committee, should design a remuneration package that is capable of attracting and retaining exec- utive directors of good calibre. Executive remuneration represents a severe problem in the global financial world, with numerous investors, shareholders, and the public becoming outspoken about the levels of remuneration of directors (Olurotimi, 2019). Particularly in the spot- light are companies that disclose poor performance, but whose executives still receive excessive remuneration, and dismissed board members who receive large severance packages (Dommisse, 2011). 4 Discussion of Results 4.1 Response rate 4.2 Test for instrument reliability The study used Cronbach’s alpha test to enable the researcher measuring the internal consistency or reliability between several items, measurements or ratings. The Cron- bach’s alpha test was primarily used in this study because it is usually applied to test the consistency and stability of the questionnaires which measure latent variables as a score to be between 0.7 and 1 (Taber, 2018). The researcher made use of the MPE database to collect data and primary data was gathered through structured questionnaires that were distributed to different public enterprises’ CEOs in Namibia. This was secondary data and primary data. The researcher checked if the documents had been checked and signed off as passed hence they are valid. The database and structured questionnaires were checked by auditors and they were signed off as passed hence making the information collected from the database valid. The data collected was the same hence it was found to be reliable to be used. 4.3 Test for sample adequacy The researcher made use of the Kaiser-Meyer-Olkin test to test for sampling adequacy. The KMO value was 0.85 which indicated that the sampling was adequate. The p-value 0.201528 is greater than the significant level 0.05 which means that these variables are statistically insignificant. The adjusted R square 0.878 means that 88% of dependent variable y can be explained by the entire set of independent variables annual salary, sitting allowance and miscellaneous allowance. Since the p-value is greater than the significant value, it becomes useless to go on and interpret the singular p values and the coefficients. We can safely accept the null hypothesis that there is no relation- ship between the firm’s performance and annual salary, sitting allowance and miscellaneous allowance. 4.4 Test for normality The normality test was done and the significance was 0.15 and from this significance, we can safely conclude that the sample is normally distributed. Table 1. Summary output. Regression Statistics Multiple R 0.979483 R Square 0.959386 Adjusted R Square 0.878159 Standard Error 77886547 Observations 4 ANOVA Df SS MS F Significance F Regression 2 1.43E + 17 7.17E + 16 11.81116 0.201528 Residual 1 6.07E + 15 6.07E + 15 Total 3 1.49E + 17 Standard Lower Upper Lower Upper Coefficients Error t Stat P-value 95% 95% 95.0% 95.0% Intercept 5.85E + 08 1.42E + 08 4.134035 0.151092 −1.2E + 09 2.38E + 09 −1.2E + 09 2.38E + 09 Annual salary 905.7209 870.3658 1.040621 0.487329 −10153.3 11964.77 −10153.3 11964.77 Sitting and −65308.3 37576.34 −1.73802 0.332386 −542761 412144.4 −542761 412144.4 miscellaneous allowance
  • 7. An Investigation into the Effect of Board Members’ Remuneration on the Performance of Public Enterprises 25 4.5 Summary of findings Demographic characteristics Out of the CEOs from the 97 public enterprises that were the participants for the research, 58 were male and 12 were female. This data revealed that most of the executive mem- bers of the public enterprises in Namibia are men. The bar graph below was used to present this data. The ages of the participants were as follows. Out of the 70 participants, 7 were between the ages of 26–35, 22 were in between the ages of 36–45 and 41 were above 46. Most of the participants were above 45 years old. This revealed that mature and older CEOs are employed in public enterprises. The participants were asked to indicate if there is a rela- tionship between board members’ remuneration and the firms’ performance and their responses were as follows. A total of 75% of the respondents do not agree that there is a relationship between the board members’ remunera- tion and the firms’ performance, though 17% agree that there is a relationship between the board members’ remu- neration and the firms’ performance. What are the factors that influence board members’ annual pay which further affect the performance of Namibian public enterprises? The respondents were asked to state the factors that influ- ence board members’ annual pay which further affect the Figure 1. Demographic characteristics of genders. Figure 2. Demographic characteristics of age groups. Figure 3. Board member’s remuneration and firm’s performance. Figure 4. Factors affecting board members annual pay. performance of public enterprises and their responses are presented below. Based on the findings, it can be revealed that board members’ annual pay is affected by the size of the firm, Return on assets (ROA), and Return on investments (ROI). However, most of the respondents indicated that the board member’s annual pay is influenced by the return on invest- ments. If the return on investment is high, it means that the income levels of board members are increased. What are the effects of sitting allowances on the perfor- mance of Namibian public enterprises? The respondents were asked to indicate the effects of sit- ting allowances on the performance of public enterprises and their responses are presented below. The respondents indicated that sitting allowance has a negative impact on performance. They argued that it slows down the operations of the government. When board members are
  • 8. 26 Nikodemus Angula and Africa Makasi given allowances for attending meetings and training pro- grammes, they will divert their focus from their duties to attending training programmes hence slowing down the operations of the business. Because of the incentive one gets from attending a meeting or training programme, wrong people are sent to attend these meetings. Sometimes a meeting might require a lower level worker or manager but because of the incentive attached to the meeting the board members might go themselves instead hence the wrong person receives the training and this affects the per- formance of the business. Sitting allowances creates unnecessary pressure and opportunities for fraud. Board members can become fraud- ulent because of this incentive which then affects the smooth running of the organisation. The intrinsic moti- vation of board members is reduced hence individual performance is reduced thereby affecting the performance of the organisation. The study sought to test the following hypothesis: • H0: There is no relationship between board members’ annual pay and the performance of public enterprises in Namibia. • HA1: There is a relationship between board members’ annual pay and the performance of public enterprises in Namibia. • H0: There is no relationship between sitting allowances allocated to board members and the performance of public enterprises in Namibia. • HA2: There is a relationship between sitting allowances allocated to board members and the performance of public enterprises in Namibia. • H0: There is no relationship between miscellaneous allowances offered and the performance of public enterprises in Namibia. • HA3: There is a relationship between miscellaneous allowances offered and the performance of public enterprises in Namibia. The table below provides a summary of the findings: Table 2. Summary of findings. Hypothesis Findings Decision (Accept/ Reject) H1 The present study found that that there is no relationship between a firm’s performance and the board member’s annual salary, sitting allowance and miscellaneous allowance. Accept H2 The present study found that the effects of miscellaneous allowances on the firm’s performance have a positive effect on the firm’s performance. Accept H3 The present study found that miscellaneous allowances have a negative impact on the performance of public enterprises. Reject 5 Conclusion From the presented data it was revealed that there is no relationship between a firm’s performance and the board member’s annual salary, sitting allowance and miscella- neous allowance. These independent variables have no influence at all on the performance of a firm. A firm can perform very well regardless of the board member’s remu- neration. Board members can receive high salaries and allowances but the firm might not perform well. There are other factors other than the board member’s salary, sitting and miscellaneous allowance that cause a change in the firm’s performance. The study findings revealed that out of the CEOs from the 97 public enterprises that were the par- ticipants for the research, 58 were male and 12 were female. This data revealed that most of the executive members of the public enterprises in Namibia are men. Furthermore, the study finds that a total of 75% of the respondents do not agree that there is a relationship between the board members’ remuneration and the firms’ performance, though 17% agree that there is a relation- ship between the board members’ remuneration and the firms’ performance. The respondents indicated that sitting allowance has a negative impact on performance. They argued that it slows down the operations of the gov- ernment. When board members are given allowances for attending meetings and training programmes, they will divert their focus from their duties to attending train- ing programmes hence slowing down the operations of the business. The study findings also indicated that the respondents were asked to indicate the effects of miscel- laneous allowances on the firm’s performance and the findings revealed that the researcher can safely conclude that miscellaneous allowances have a positive effect on the firm’s performance. Miscellaneous allowance motivates board members to improve their performance which in turn improves the performance of the organisation. How- ever, some of the respondents revealed that miscellaneous allowances have a negative impact on the performance of public enterprises. The study findings further indicated that the respondents were asked to fill in the Likert scale. 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