Remuneration Committees and Attribution Disclosures on Remuneration Decisions: Australian Evidence

The use of remuneration committees (RCs) to foster corporate accountability concerning executive remuneration decisions has attracted increasing public attention following various corporate scandals and the recent global financial crisis (GFC). This study empirically examines the link between RCs and attributions disclosures, i.e. explanation of reasons for executive remuneration decisions. Using a sample of 644 firm-year observations drawn from top 200 Australian Securities Exchange (ASX)-listed firms from 2007 to 2011, we find that firms with RCs tend to voluntarily disclose attribution, and the extent of disclosures increases with remuneration committee quality. While existence of attribution disclosures is related to pay-performance sensitivity, the extent of disclosures does not show incremental effect on pay-performance sensitivity. The results also show that the presence and quality of RCs are positively associated with internal attribution disclosures regarding executive remuneration decisions during the GFC, suggesting corporate responsiveness to corporate accountability demands at times of economic crisis.