The Remuneration Committee Characteristics and Excess CEO Pay: Evidence from Malaysia

This study examines the monitoring effectiveness of the remuneration committee within corporate boards. Utilizing a dataset of Malaysian listed firms from 2017 to 2021, the findings reveal that an index combining demographic and expertise characteristics (gender, age, ethnicity, educational background, financial expertise, and multiple directorships) better captures remuneration committee diversity than any individual facet. This diversity is associated with a reduction in the Type I agency problem. In contrast, the findings indicate that most independent remuneration committees are ineffective in reducing excess chief executive officer (CEO) pay, potentially exacerbating Type I agency issues. This study offers valuable practical implications for regulators, particularly the Securities Commission Malaysia, as it continues to advance corporate governance reforms. The study also motivates listed companies to adopt best practices in board composition and oversight.