Essays on Corporate Governance Goals in Australia Report

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The paper "Corporate Governance Goals in Australia" is a great example of a report on management. In recent times, corporate governance has dominated the corporate world, although its definition remains elusive. In a broader perspective, corporate governance entails various organizational, economic, legal, and social initiatives aimed at ensuring transparency, accountability, and performance in the corporate world. Its wider acceptance came after increased financial scandals that engulfed corporations in the 20th century. Many corporate governance strategies have relied heavily on managerial compensation, in the form of equity-based remunerations, as the most effective way to make them more transparent and accountable in a bid to improve the performance of the organizations.

This type of compensation involves linking the employment earnings of top executives to the value of the shares of the company. Most of them take the form of share options – share plans that allow employees to purchase a particular amount of an organization’ s stocks for a given price, popularly referred to as strike or exercise price – and stocks. The programs have been associated with various objectives, including giving the employees sense of ownership, aligning their interests with those of investors, making them select decisions that maximize investors’ wealth and others.

However, despite being key elements of governance in the corporate world, the schemes may encourage the wrong type of behavior among the executives. According to Larcker and Tayan (2011), most of the scandals witnessed in America’ s corporate environment were caused by managers’ unethical behaviors influenced by the overreliance on performance-based schemes. Among others, the schemes may encourage executives to engage in backdating of the stock options, manipulating the prices of shares to gain short-term benefits, and unwarranted retaining of earnings.

Despite parity in the use of equity-based remunerations across various nations, Australia seems to lag behind other countries such as Canada and the USA in accepting the schemes. Only an insignificant number of listed companies in Australia utilize the schemes to improve managerial performance. Among the most significant reason for this lag regards taxation of the stock options - this has not been the case in other nations like the USA until 2006. The current essay explores the usage of performance-based compensation in Australia, as well as some of the corporate governance goals and chief executive officers’ behavior related to these schemes.

References

Fernando, AC 2009, Corporate governance: principles, policies, and practices, Pearson Education India, New Delhi.

Larcker, D & Tayan, B 2011, Corporate governance matters: a closer look at organizational choices and their consequences, FT Press, Upper Saddle River, NJ.

Pasula, C 2009, Changes to the taxation of employee equity arrangements in Australia, TaxTalk, viewed 24 May, 2011,

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