A survey of performance measures for executive compensation schemes in public listed companies in Kenya
Abstract
This is a survey seeking to establish the performance measures for executive
compensation schemes in public listed companies in Kenya. The study covered a sample
of thirty-nine companies listed in the Nairobi Stock Exchange under the Main Investment
Market Segment (MIMS). A questionnaire was administered to all the companies in the
sample. However only twenty-four companies responded giving a response rate of sixty
two percent which was considered adequate for the study.
Attributes of the companies that responded were obtained from the audited financial
statements covering the period 1998 to 2002. There was no great distinction on the
attributes of the companies that use various performance measures.
From the survey it is evident that most firms use both financial and non financial
measures of performance (balanced score card) in designing executive compensation
schemes for senior management. These firms are both local and foreign owned.
It is also evident that growth in earnings is the most common financial measure of
performance while increase in market share is the most common non financial measure of
performance.
Most companies prefer using accounting based measures of performance because they
are measurable and quantifiable as opposed to market based measures of performance.
Therefore we can deduce that measures of performance are key to deciding the basis of
compensation used for senior managers and companies in Kenya use these measures in
designing executive compensation schemes. Measures of performance are therefore
instrumental in alleviating the agency problem between shareholders and managers.
Citation
Masters in Business Administration, University of Nairobi (2004)Publisher
University of Nairobi Faculty of Commerce