Rewarding leadership: CEO compensation and growth outcomes in agricultural industry

Abstract

Performance-based CEO pay is becoming more popular as a way to align executive incentives with business growth. However, the research results are still not consistent, especially in emerging markets such as Malaysia. In some cases, CEOs continue to receive high compensation even when companies perform poorly, and many companies provide limited disclosure of executive pay. This raises concerns about whether CEO compensation truly supports sustainable company growth. The objective of this study is to examine the relationship between chief executive officer (CEO) compensation and company growth among Malaysian public listed companies. A sample of 25 companies in the agricultural industry from 2021–2023 was selected. All financial data were collected from Orblis and companies’ annual reports. Fixed effects panel regression analysis was used to determine the relationship between the dependent and independent variables and control variables. The results reveal a significant positive relationship between CEO compensation and company growth. Well-structured and performance-based CEO compensation aligns management and shareholder interests, supporting both agency theory and human capabilities theory by enhancing leadership effectiveness and company growth. It further underscores the need for strong governance, transparent disclosure, and independent compensation committees while also signaling to shareholders and investors that executive pay design reflects governance quality and long-term value creation. All the control variables, such as company size, liquidity and company age, are positively related to company growth, whereas leverage is negatively related to company growth. Future research should involve a larger sample across different industries and longer time periods while also considering CEO compensation components, executive characteristics, governance factors, and external conditions to better explain company growth.