One of the main controversial issues arises from the weaknesses in the corporate
governance practices is the directors’ remuneration. The question raised is whether the
remuneration paid to the directors is consistent with the interest of the shareholders.
Therefore, the main aim of this study is to identify the key determinants of directors’
remuneration in Malaysia. This study examines the relationships between the
company’s characteristics and corporate governance characteristics with directors’
remuneration. For this research, the company’s characteristics selected are the company
size, company leverage, company performance. Meanwhile, the corporate governance
characteristics selected are the board leadership structure and the independence of the
remuneration committee. A sample of 260 public listed companies on Bursa Malaysia
was selected using stratified random sampling for the financial reporting year 2018. All
data concerning company and corporate governance characteristics are obtained from
the annual reports of the company which are accessible from the Bursa Malaysia
website. Pearson correlation and multi regression was used to analyse the data to
determine the relationship of the predictor variables with directors’ remuneration. It was
found that only company size showed a significant positive relationship with directors’
remuneration. Company performance showed a positive but weak relationship with
directors’ remuneration, which suggest that the remuneration paid to directors are not
linked to company performance. The remaining predictors have no relationship with
directors' remuneration. The findings suggest that the larger the company, the higher
would be the remuneration paid to the directors. Besides, the directors' remuneration is
not depending on the profit made by the company. Lastly, company compliance with
the recommendation of Malaysian Code on Corporate Governance does not guarantee
the effectiveness of the monitoring function of the remuneration committee in ensuring
that the directors' remuneration is commensurate with the company performance.
