Impact of the Remuneration and Nominations Committee Characteristics on the Resignation of Board Members: An Empirical Study on Saudi Companies

Abstract

Purpose: To measure the impact of the Remuneration and Nominations Committee characteristics on the resignation of non-executive and independent board members in non-financial Saudi listed companies.
Study design/methodology/approach: Data is extracted from Board of Directors reports, and the annual financial statements of non-financial companies, Form No. 1 & No. 3 of the CVs of members of the Board of Directors issued by the Capital Market Authority when running for membership of the Board of Directors.
Sample and data: The sample included 167 companies in which 319 resignations occurred during the period from 2007 to 2022.
Results: The study found that the size, independence, and activity of the Remuneration and Nominations Committee had a significant negative impact on the resignation of non-executive and independent board members. The same result was found for the combined index of these characteristics.
Originality/value: Due to the lack of Arabic studies in this field of study in general, and the Saudi environment in particular. This study constitutes one of the first studies that attempts to measure the role of the Remuneration and Nominations Committee and its impact on the resignation of board members. The results of this study contribute to providing a clearer vision for legislators, regulators, policy makers, investors, lenders and financial analysts about this Committee.
Research limitations/implications: The study is limited to the resignation of non-executive and independent board members in non-financial Saudi listed companies.