An Examination of Executive Compensation and Firm Performance: A Case Study of Nigerian Breweries
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Background of the Study
Executive compensation has been a subject of extensive debate in corporate governance and financial performance literature. It includes salaries, bonuses, stock options, and other benefits offered to top executives to align their interests with those of the company. In theory, well-structured compensation packages incentivize executives to optimize firm performance. However, the relationship between executive pay and firm performance remains contentious, particularly in emerging markets like Nigeria (Adekunle & Uche, 2023).
Nigerian Breweries, one of the leading breweries in Nigeria, provides a suitable case for examining this dynamic. Despite its status as a market leader, concerns have been raised about whether its executive compensation aligns with its financial and operational outcomes (Ogundele et al., 2024). This study explores the connection between executive pay and performance metrics such as revenue growth, profitability, and shareholder value.
Statement of the Problem
The disparity between executive compensation and firm performance in Nigerian corporations has raised concerns about fairness and accountability. In Nigerian Breweries, executives receive significant pay packages, yet fluctuations in profitability and market share suggest a potential misalignment between compensation and performance outcomes (Eze, 2023).
If executive compensation fails to reflect performance, it could undermine shareholder confidence and the company’s long-term sustainability. This issue necessitates an in-depth examination of compensation structures and their impact on firm performance.
Objectives of the Study
- To analyze the relationship between executive compensation and firm performance in Nigerian Breweries.
- To assess the alignment of executive pay with performance metrics such as profitability and shareholder returns.
- To propose strategies for optimizing executive compensation to enhance firm performance.
Research Questions
- What is the relationship between executive compensation and firm performance in Nigerian Breweries?
- How aligned is executive compensation with performance metrics such as profitability and shareholder returns?
- What strategies can optimize executive compensation to enhance firm performance?
Research Hypotheses
- Executive compensation significantly influences firm performance in Nigerian Breweries.
- Misalignment exists between executive pay and performance metrics in Nigerian Breweries.
- Optimized compensation structures can enhance firm performance.
Scope and Limitations of the Study
The study focuses on Nigerian Breweries, analyzing executive compensation and its impact on firm performance between 2023 and 2025. Limitations include restricted access to internal compensation data and potential bias in publicly available reports.
Definitions of Terms
- Executive Compensation: Financial and non-financial rewards provided to top executives in a company.
- Firm Performance: Metrics that measure a company’s success, including profitability, revenue growth, and shareholder value.
- Shareholder Value: The financial worth delivered to shareholders through dividends and stock price appreciation.
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