For Sunan Pty Ltd to have a successful float, a detailed and well thought out compensation governance needs to be developed. The following recommendations have been built create a compensation package to help maximise shareholder interest for Sunan Pty Ltd.
PRINCIPLES OF REMUNERATION
Remuneration packages should be created to attract executives capable of motivating people, communicating a vision, and leading a company to success to achieving
long-term shareholder value
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Remuneration packages should reward success over short and long term periods with an emphasis on the long term
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Remuneration packages should be fair to all stakeholders of the business
REMUNERATION COMMITTEE
The determination of executive’s compensation packages should be handled by a committee composed of fully independent directors.
Remuneration committee members should have ability to exercise independent judgement while being able to balance the long term shareholder interests with the need to attract, motivate and retain executives. To make sure there is a good balance the committee must consider the committee members and how the committee works.
Selecting Committee members
In selecting the committee members, Sunan Pty Ltd should consider the following:
• Diversity of professional backgrounds and if possible include members who specialise in executive compensation.
• There should be nothing less than 66% non CEO representation on the board.
• Mr Sonny Sunan should not be part of the board to make the board fully independent.
Mr Sonny Sunan should not be part of the selection of members who serve on the remuneration committee to keep it fully independent.
Role of the Committee
The role of the committee is to:
• Oversee Sunan Pty Ltd remuneration policies
• Recommend incentive based compensation and equity based plans to the board.
• Review and recommend salary packages to attract and retain senior management.
• Conduct annual performance evaluation and recommend a package or remuneration.
< http://www.ventracor.com/investor/corpgov/Remuneration%20Committee_Sept03.pdf>
TYPES OF CONPESATION PACKAGES
I recommend an executive compensation program which includes a base salary performance bonuses and long-term incentives in the form of stock options. The stock options should have restrictions on them in which they can only be sold once certain conditions are met. This encourages the interests of both executives and shareholders to be aligned.
Some options the committee could implement may be:
Share ownership
The remuneration committee should make it a requirement that executives maintain a large equity investment in Sunan Pty Ltd. Stock ownership guidelines should be put in place to align the interests of the executives with the shareholders. The committee should make it mandatory that executives hold a significant amount of the company’s stock.
Short term incentives
In April 2010, KK BB, the CEO of Marshall & Gordon, a leading public relations firm met with the firm’s leadership committee off-site in Miami. This off-site brought together Marshall & Gordon’s executive committee, practice and regional heads, and senior HR officers to discuss on redesigning the firm’s compensation system. A global advisory taskforce, under the direction of an external consulting firm, had spent three months collecting and analyzing data. Marshall & Gordon hired external specialists to design the new performance management program. The specialists proposed that the senior managers and human resource form a global advisory unit together with Marshall & Gordon partner to represent the firm’s five regions of the firm and lead the design process. The advisory unit surveyed all consultants in February in order to understand their way of thinking about the fairness, worth, and effect of the current performance management system. Majority of the interviewees responded to the corporate surveys implying that the subject was topic was especially exciting to them. Interviews gave insights on present and prospective business plans and direction. The survey also showed that specific focus across certain employee populations should be given. Six current hires from key competitors were also interviewed to comprehend competitor pay practices and compensation program structures. Further focus groups discussions and key information interviews enabled the taskforce’s to understand the needs of certain groups within Marshall & Gordon’s worker population. The survey culminated with the taskforce conducting interviews of 20 partners and principals togeth...
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
Sollars, G. C. 2001. An appraisal of shareholder proportional liability. Journal of Business Ethics, 32(4), 329-345.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
Performance related pay is a financial reward given to employees whose work is considered to have reached a required standard or is above average. “PRP criteria can relate to the individual employee, to work groups or to the organization as a whole” (Armstrong, 2002). It is fair to provide people with financial rewards as a means of paying them according to their contribution (Armstrong 1993:86). The primary purpose of performance related pay in any organization is to recruit, retain and motivate the workforce. It also helps in focusing employees’ minds on particular goals (Protsik, 1966); communicate to employees an organization’s core values, and change the culture of that organization (Kessler and Purcell, 1991).
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.
The foundation for effective job performance and compensation system can be traced to effective job analysis process. Fundamentally, a job analysis should consist of a thorough examination of the job 's duties and knowledge, skills, abilities, and qualities that are required in order to be successful in a specific position, upon which appropriate rewards or compensation can be determined. For many perspectives, jobs are usually made up of requirements and rewards, where rewards may be regarded as a major recruitment strategy for motivating potential employees in order to influence them to stay the organization for a longer period as well as enhance their performance. The most common or basic form of rewards which attracts employees is extrinsic
Johnson, Sam T. "Plan your organization’s reward strategy through pay for performance dynamics: Compensation & Benefits Review 30, Number 3: (May/June 1998): 67-72
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...
For setting directors’ remuneration, the board must form a Remuneration Committee. A prior approval from the shareholders of the members on the committee is recommended. However, when it is not possible for solid reasons, the members must be presented in the AGM to the shareholders for approval if they are already appointed. The following guidelines must be followed:
Securities Commision Malaysia. (2014). General Article: Corporate Governance. Retrieved March 26, 2014, from Securities Commision Malaysia: http://www.sc.com.my/corporate-governance/
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.
Employee compensation and reward systems have undergone a couple of paradigm shifts since inception. Reward systems were traditionally compensation based and focused on the individual or the position (Beam 1995). After a recession in the early 1980's, employers turned to performance based models in an attempt to save money while still rewarding top performers (Applebaum & Shapiro, 1992). Today, the most successful organizations are using a total reward model, a hybrid of the performance based model combined with strategic human resource management planning to create reward systems that both benefit the employee and help organizations realize their operational goals (Chen & Hsieh, 2006).
In large organisation, competition is not only in the market for goods and services but also for the quality of employees. As such, a large organization can only become attractive to the most skilled and high quality workers if it has an effective compensation and benefit plan. The key purpose of an effective compensation and benefit system is to provide employees with the right rewards for their work and right behavior in the workplace. Typically, organizational success is determined by the quality of employees an organization has. In turn, the organization can only attract such quality workers and maintain them through effective compensation and benefit
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.