Corporate Governance and Top - Management Compensation in Public Companies

Abstract

The purpose of the paper is the presentation of initial findings of analyses focussed on factors determining the level of top-management compensation in Polish companies listed on the Warsaw Stock Exchange. Among others such factors are presented as firm size, complexity of the decision-making process, the form of control over the company, type of corporate govemance. Verification of a simple model was carried out on a sample of 195 companies. An analysis of collected empirical materiał confirmed a part of formulated hypotheses. Firstly, a form of control over the company determines topmanagement compensation level. In companies, in which executives hold a dominant błock of shares the average compensation is by almost 30% lower than compensation in the remaining companies. Even bigger variations were observed in companies with a dominant foreign investor. Average executive compensation was almost twice higher in them. On the other hand, presence of a strategie domestic investor or the State Treasury did not account for any statistically significant vanations in top- management compensation. A hypothesis about correlation between executive compensation and firm size was also confinned. For the group of companies controlled by executives, this correlation is the strongest when examining sales dynamics. There were not discovered any statistically significant correlation between compensation level and dynamics and relative effectiveness indices (ROE, ROA, profitability of sales) Statistically significant correlation between executive compensation and absolute profit level and cash flow index (profit plus depreciation) could be observed in all groups of companies with the exception of companies with foreign investor.