Managerial Compensation and Firm Performance in Cameroon Microfinance Institutions

The rise in managerial pay over the past decades has sparked an intense debate about the nature of pay setting process. Many theoretical and empirical findings have portrayed direct and opposing relations between managerial compensation and firm performance within enterprises in general and financial institutions in particular. Here, managerial compensation retained as endogenous variable is captured using base salary and bonuses while firm performance as exogenous variable is measured using return on equity (ROE) and firm size while board size, is capturedthrough ownership and tenure served as control variables. We used questionnaires administered to managers of the respective institutions alongside with their pay slips and report of financial statement. STATA 12.0 was used to carry out our statistical test and regression analysis. Our sample survey consisted of 10 microfinance establishmentsin Cameroon for the period of 2007-2012. The results obtained depicted a negative significant relationship between pay and ROE regarding micro-finance establishments. Firm size on its part portrayed a positive influence on managers compensation in micro-finance establishments. We recommend that decision-making in microfinance establishments should be driving incentives to cap managerial compensation with firm performance.