Essays on The Company Executive Remuneration Coursework

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The paper "The Company Executive Remuneration" is a great example of business coursework.   In a company, the management is the body in which the power to make all decisions is vested. This makes the management a supreme body that is responsible for developing the business systems that will be used in running the company. The issue of remuneration of executives and directors becomes heats up when all the shareholders have to decide the amount to reward the company drivers. This is mainly because the shareholders will differ in the model that the company should use to remunerate the executives and the directors.

In many cases, voting is done with the exclusion of the directors regardless of their stake in the company or their level of ownership. This ensures that there is a fair system in place. This, however, does not happen all the time. There are those companies where the remuneration of the management is left to the discretion of the same management and therefore they have to decide how to pay themselves (Sverige & Kodgruppen 2004). A basic fact is that, when you own property, you are more likely to take care of it than when you are watching over the property of another person.

There is a greater level of seriousness that comes along with ownership. This is mainly triggered by the feeling of attachment and involvement. The same case applies in a situation where a company decides that the management will earn from their efforts. This is mainly by the creation of a remuneration model where the directors and the executives earn from the bonuses of their shares.

This will serve as a wakeup call for hard work since the executives want to earn more and therefore they will put more effort into the running of the company. This will include strictness in the management of funds and administration of company transactions. When the remuneration of the company directors and executives is not fixed, rather, it is determined by the yields of the company, they will ensure that the company keeps improving in financial performance to realize more profits and hence an increase in their bonuses. Making the executive’ s and director’ s remuneration subject to the financial performance of the company will also reduce the chances of fraud and corruption in the company management.

This is because as much as a director would like to be corrupt and either embezzle some funds alone or team up with fellow directors to fraud off the company, it will be like stealing from themselves. This is because any reduction in the company funds reflects in their remuneration sheets. It, therefore, looks like a seesaw where an increase in company performance reflects on the director’ s payslips and poor financial performance in the company reduces the director’ s earning (Braiotta, Hickok & Biegler 2004). The director remuneration model based on company financial performance should ensure that in case of a loss in the company, compensation to the company is done by reducing the shares that a director owns and this is done proportionally depending on the level of service of any company executive.

This will show the seriousness of the remuneration model to the management and to make this policy even stricter, a reduction in the ownership of shares should be irreversible unless the director follows down the procedure of share procurement again.

This information must appear in the company constitution and article of association. Such a remuneration model reduces any interests that a company executive could have that are intended to rip off the company (Roche, 2005).

References

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1. Michael Armstrong, Helen Murlis 2007 A Handbook of Remuneration Strategy and Practice Kogan Page Ltd

2. Sigurt Vitols 2003, Negotiated Shareholder Value: The German Version of an Anglo-American Practice December WZB Markets and Political Economy Working Paper No. SP II 2003-25

3. Sverige, Kodgruppen, 2004, Swedish Code of Corporate Governance: A Proposal by the Code Group. Norstedts Juridik AB,

4. J. E. Parkinson, 1995, Corporate power and responsibility: issues in the theory of company law, Oxford University Press,

5. Julian Roche 2005, Corporate governance in Asia, Routledge,

6. Louis Braiotta, Richard S. Hickok, John C. Biegler, 2004 The audit committee handbook, John Wiley and Sons,

7. Tim Koller, Marc Goedhart, David Wessels, Thomas E. Copeland, McKinsey, 2005 Valuation: measuring and managing the value of companies, John Wiley and Sons,

8. Martin Conyon, Paul Gregg and Stephen Machin, Taking Care of Business: Executive Compensation in the United Kingdom The Economic Journal, Vol. 105, No. 430 (May, 1995), pp. 704-714

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