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INFLUENCE OF CHIEF EXECUTIVE OFFICERS (CEO’S) COMPENSATION ON PERFORMANCE OF COMPANIES QUOTED AT THE NAIROBI SECURITIES EXCHANGE

Geoffrey M. Irungu
Jomo Kenyatta University of Agriculture and Technology


Karanja Ngugi
Jomo Kenyatta University of Agriculture and Technology

ABSTRACT

Globally, for instance in America, The Enron scandal was  revealed in October 2001, and eventually led to the bankruptcy of the Enron Corporation, an American energy company and the dissolution of Arthur Anderson, which was one of the largest audit and accountancy firm in the world. Locally, data available from NSE revealed that Uchumi supermarkets Limited, was put under statutory receivership in the year 2006. The evidence cited that Uchumi Supermarket was a case of misappropriation of funds by the top management. Would C.E.O compensation be the cause of the problem? The general objective of this research is to analyze the influence of (CEOs) compensation on performance of companies quoted at Nairobi Securities Exchange. The study adopted descriptive research. The population of interest in this study consisted of all the CEOs of companies quoted in the NSE. Using simple random sampling, a sample of 183 was selected at random from a target population of 840 employees in the 10 sectors of NSE. The data was analysed using SPSS and the Microsoft excel to generate quantitative reports. The research concludes that, most of the total incentives of CEO are stock based incentives, which is greater than pay based incentives. Positive relationship exists between the cash-flow ownership of the largest shareholder and firm value. Cash compensation is negatively related to the percentage of stockholdings of insider directors and executives. Research concludes that directors need less fixed cash compensation since they already benefit directly from the value of their shares.


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