The impact of board structure and government ownership on director remuneration: empirical evidence of government linked companies

This thesis investigates some of corporate governance practices in Malaysian public listed companies with a particular interest in selected government linked corporation (GLCs), participating under the government transformation programme (GTP). Thus, this study uses board characteristics, government ownership and performance as independent variables that affect directors’ remuneration. The board characteristics consists of board size, proportional of independent director, proportional independent director in remuneration and audit committee and CEO tenure. The control variables used are firm size, leverage and growth in this study. The study explains the relationship between director remuneration and corporate governance structures in a distinguished setting when the government has some influence in corporate decision making. There are 20 GLCs (known as G20s) selected under implementation of government transformation programmes starting from 2004. The study is conducted based on balanced data under observation for 6 years (2010-2015). However, due to sample selection criteria, there are only fifteen companies left for selection in this study. The agency theory and steward theory are used in this study to determine whether there is an implication in the corporate governance issues towards directors’ remuneration. Using pooled OLS and Panel data regression techniques, it is found that board characteristics – independent directors and board meeting are negatively significant to the directors’ remuneration. However, the government ownership and performance is not significant. Thus, the steward theory is rejected due to difference in political and policy applied by sample companies. Moreover, firm size, growth and leverage show significant positively relationship to the director remuneration. Finally, the agency theory is more relevant in explaining the corporate governance issues to determined director remuneration in Malaysia