Effect of Remuneration Committee Independence on Executive Pay and Performance Alignment in Listed Firms

This study examines the effect of remuneration committee independence on the alignment between executive pay and firm performance in listed companies in Nigeria. Executive compensation that is misaligned with performance outcomes is a persistent agency problem, generating shareholder discontent and undermining public trust in corporate governance systems. Remuneration committees, when composed primarily of independent non-executive directors, are theoretically better positioned to design pay packages that objectively reward performance rather than entrench incumbent executives. Drawing on agency theory and the stewardship model, this study evaluates whether remuneration committee independence in Nigerian listed firms is associated with stronger pay-performance sensitivity. An ex-post facto research design is employed, using secondary data from corporate governance and remuneration reports of twenty-five listed firms over five years. Pay-performance sensitivity is measured using the coefficient from regressing executive bonus payments on firm performance indicators. Panel regression controls for firm size, industry, and leverage. The study anticipates that higher remuneration committee independence is associated with significantly stronger pay-performance alignment. Findings will assist listed company boards, the Securities and Exchange Commission, and institutional investors in evaluating remuneration governance standards. Keywords: remuneration committee, executive pay, firm performance, corporate governance, listed firms.