Linking Compensation Packages to Operational Performance: Evidence from the Consumer Goods Sector (2002-2024)

Abstract

Understanding the link between compensation structures and operational performance is crucial in Nigeria’s evolving consumer goods sector. This study investigates the impact of directors’ remuneration, salaries, wages and allowances, and employee benefits on operational performance measured by Return on Assets (ROA). Using an ex post factor research design, the study analyzed secondary data from audited financial statements of
Nestlé Nigeria Plc, CBN Statistical Bulletin and World Bank Open Data spanning 2002 to 2024. Analytical techniques included multiple regression via E-Views, descriptive statistics, autoregressive (AR) terms, the Breusch-Godfrey Serial Correlation LM Test, heteroskedasticity, normality tests, Q-statistic probabilities adjusted for one ARMA term, and strategic tools such as SWOT and PESTEL analysis. The regression results indicate that none of the compensation components, directors’ remuneration (p=0.1066), salaries/wages/allowances (p=0.3812), or employee benefits (p=0.9938) had statistically significant effects on ROA. Among macroeconomic variables, only exchange rate had a significant negative influence (p=0.0023), while inflation (p=0.6637) and GDP growth (p=0.6005) were not significant. Despite this, the overall model was statistically significant (F statistic = 14.71, p < 0.001), explaining approximately 88% of the variation in ROA (R² = 0.88). The study’s limitation to a single firm, Nestlé Nigeria Plc may affect the generalizability of findings across the sector. However, the findings emphasize the need for performance-based compensation strategies, proactive foreign exchange risk management, and the use of macroeconomic indicators as planning tools rather than direct performance levers.