Is there a Relation between CEO Remuneration and Banks' Size and performance?

Abstract

The goal of the study is to establish what kind of relationship, if any, exists between CEO remuneration and Banks size and performance. The study is extremely relevant, especially in the financial sector after the crisis of 2007-2008. Many critics have argued both as rhetoric as well as an empirical study that high executive pays have a negative impact on the sustainability and success of a firm. Studying the literature reveals plurality in positions. Since this is an extremely complex question, it is understandable that literature exists arguing on both sides of the debate. This paper collected data on Bank Size and Bank Performance for 6 Canadian banks to study their correlation with CEO remuneration. It was hypothesized that there existed a positive relationship between CEO remuneration and Bank Size (measured by Sales, Deposits and Employees) and Bank Performance (measured by ROA, ROE and Profit Margin). The data was put through SPSS for a Pearson coefficient analysis which revealed a strongly positive correlation between CEO remuneration and all three variables of Bank Size. On the other hand, no significant relationship could be established between CEO remuneration and Bank Performance except a weak positive relationship with ROA. The study can be helpful in executive decision making. However, it also calls for further research into external factors that have an impact on the relationships between these variables. Most importantly a comparison study following the same methodology of different regions can give us more useful business intelligence and insight