Introduction Since almost 2 decades, the corporate governance practices of companies and directors remuneration have been subject to considerable scrutiny. The investors and regulators now are careful to avoid corporate practices that led to this problem, and try to prevent such a tragedy from taking place again. A key issue brought to attention by the crisis was the concern about the pay gap between directors and employees in UK and this issue since then has become a global debate analyzing the inequalities that took place due to the widening of the pay gap. In line with this pay gap problem, it has been stated that “The level of remuneration received by the directors of FTSE100 companies cannot be justified on economic or fairness grounds. Remuneration committees have failed and major reforms are required”. This essay will critically discuss the above statement and discuss its justification. Research on the concerned topic has shown that the pay gap has increased due to a number of reasons such as the significant differences in the basic salary, in addition to the elements of performance based remuneration process which continues to widen this gap. Secondly, the use of market rates to decide remuneration, thirdly balancing short-term and long-term incentives, fourthly, directors’ decision in their own remuneration and lastly good faith of directors and success of the company as a whole. These reasons are further illustrated in detail in the following sections. The first section of this essay will focus on the analysis of directors’ remuneration in the light of current principles set by the UK corporate Governance Code. Section 2 will evaluate the justification of economic or fairness standards set by the UK regulation... ... middle of paper ... ...izational hierarchy, similar responsibilities of the directors and characteristics should be a benchmark for their base salary level and their total remuneration package. Using this scheme the top directors benchmark themselves against their peers in other companies, and being seen to earn a large bonus or options award can boost their self-esteem and exhibit their worth. This has become even more important given the public disclosure of directors pay and bonuses; it’s not the absolute amount of pay that is important, but the relativities to their contemporaries. There is a significant increase in competition between companies and the incentives also influence the directors’ decision to keep working for the company. Thus if companies adopt measures to properly articulate this standard, it can be justified to implement this measure for determining the remuneration.
The company Steel Co, which has been established for around 30 years, has been in a steady decline during the current recession and although a Divisional Director has been employed by the owner the fortunes of the company have not improved. The staff is unhappy, unproductive and unimpressed by the Human Resource system that currently exists in the company. The pay structure that currently exists within the organisation has been much debated among employees who feel it is unsatisfactory. The Business Adviser will research Performance and Reward management tools in order to help the company develop a more suitable Performance and Reward system to use. A variety of sources will be used in order to evaluate the system and tools against other organisational frameworks. The pay structure within the company will also be looked at in order to identify any possible changes that could be made.
This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.
When new competitors enter the market, they will have high costs of production due to the lack of economies of scale.... ... middle of paper ... ... The employees’ earnings and promotions were determined in direct proportion to their individual compensation towards the company’s success.
Blau, F., & Kahn, L. (2007). The Gender Pay Gap: Have Women Gone as far as they can. Academy of Management Perspectives , 21 (1), 7-23.
• Executive’s incentive bonus and pay will be transparent and aligned to the performance of the company.
Company homepage. Retrieved 30 May 2005, from www.idglink.com/home/home.asp. Kleiner, M. (1992). Incentive pay: Not just for top management. Work Study, 41, (2), 16.
It is concluded that neither of the above proposals are adequate in that any practical benefit that results from the proposal such as employee and shareholder engagement are outweighed by the theoretical impact of increasing the overlap of the organs which would alter the structure of company law. The legal side of directors’ remuneration appears to be sufficient with the directors’ duties legislation acting as an efficient preventative measure for the problems that directors’ remuneration creates. Furthermore, shareholders already must approve several payments as such this could be strengthened to tackle the issue and employees are to some extent taken care of within s172 as such it is these sections that need development rather than directors’ remuneration.
Evolving societal, political, as well as cultural perceptions of corporate boardroom membership are somewhat eliciting interest in the diversity of corporate directors. Additionally, the increasing worldwide desire for enhanced corporate governance is also a reason (Carter et al. 2010, p.396) and (Grosvold, Brammer and Rayton, 2007, p.347). For instance, in the UK, novel corporate governance laws after the Cadbury Report as well as the Higgs Review have highlighted the value of boardroom diversity, including gender diversity, and the necessity for choosing directors from a broader ta...
Perhaps you can then discuss if there is evidence to suggest that the difference in remuneration has to do with the difference in media interest. CHECK
The above examples of pay show that the more skills, experience employees are with the organization the more they are compensated. Organizations would benefit by utilizing the same practice’s Disney extends to their workforces. For those businesses whose primary purpose of their plan is to only meet compliance requirements could greatly benefit by developing a comprehensive benefit plan. This could help increase their return on investment. The value I believe a business may gain from Disney’s compensation plan is to appeal to competent workers, to maintain those workers, and to motivate workers to direct their energies towards achieving the goals of the organization. Companies can set up policies to conduct a market study on a regular basis to implement a real performance appraisal system and then work on retaining good employees and elimination of poor performing workers. By following Disney’s lead of in obtaining those who best fit their company’s culture and supporting the company’s Mission. To guarantee that the pay structure is externally competitive, a pay survey should be shown. The results of a survey to be valid, the market pay data must be from the relevant labor market for each benchmark job. I would advise that a survey of regional and global pay data should be collected from the company, because for example, most of the office support, HR and operations jobs will be filled by local applicants. A job analysis is the procedure of reviewing jobs in an alike business. The result of this process is a job description “that includes the job title, a summary of the job tasks, a list of the essential tasks and responsibilities, and a description of the work context “(Burke, 2008). A job description consists of the knowledge, skills and aptitudes necessary to do the job. A job evaluation is the process of adjudicating the comparative value of job within a company
Remuneration management is defined as the sum received for an employment or service delivered, this includes the money received on a monthly basis as well as benefits given as rewards (investopedia,para.1 ). Individualism need to be taken into account when implementing these remuneration structures or reward schemes, equal pay plays a role in balancing earnings among the diverse workforce (Shen, Chanda, D’Neetto and Monga,2009,p.241). The Woolworth’s Holdings uphold remuneration policies which have the purpose of making sure to attract and hold on to the best talent, that they are congruent with the strategies of the company and are the determinants of performance during the short and long phases. The policy considers the board members and the employees. This policy manages employees of the company by giving...
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
In any organization, sometimes, monetary schemes doesnot get people involve to pursue work in a certain way, rather it demoralize and threatens the self-esteem of employees. According to Meyer (1975), “the basis for most of the problems with merit pay plans is that most people think their own performance is above average”. The amount may ...
The total pay package has a direct impact on the successful recruitment, selection and the retention of staff within any organization. This pay package is critical for any business to remain competitive in today’s business world. Competitive compensation packages are vital to both large and small organizations as they encourage the retention of talented staff.
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.