New Zealand's Discourse on Executive Remuneration

Purpose: Zajac and Westphal (1995; 2004) found that US companies have transitioned from corporate (or managerial) to agency (or shareholder) logic. This study examines the institutional logic embedded with New Zealand’s discourse on executive remuneration, and how it influences the decision-making of remuneration committees. Design/methodology/approach: Data are collected from 33 semi-structured interviews with 5 executives, 16 non-executive directors, 7 consultants, and 5 representatives of issuers (who produce codes of best practice). The interviews focused on executive remuneration in New Zealand publicly listed companies. Findings: Non-executive directors draw on a multitude of rationales to justify or legitimise their decisions regarding executive remuneration. The rationales include: agency, consultant, fairness, human resources, market, motivation, pay-for-performance, and responsibility. However, the market rationale dominated the discourse on executive remuneration. The majority of non-executive directors, executives, and consultants interviewed argued that one executive’s remuneration should be comparable to another executive’s remuneration. Research limitations/implications: Both the agency and corporate logics have been institutionalised in New Zealand. However, the dominant remuneration rationales fit with the corporate logic, rather than the agency logic. Practical implications: As the remuneration rationales are taken-for-granted they offer non-executive directors considerable flexibility in deciding how and how much to remunerate executives. Shareholders and regulators need to be aware of this flexibility. Originality/value: This study develops and tests a theoretical framework for understanding how institutional logics can influence organisational decision-making. Type: Research pape