Group Report: "Measuring and rewarding performance" - A study of Executive Remuneration for performance in Australian Public Companies
Most of the second half of this subject focusses on how firms can measure performance and in turn, reward effort through bonus and incentive schemes.
There is often a great deal of public discussion about how much is reasonable for a CEO to be paid either in their current role or at retirement are times when large payouts, often in the millions of dollars, are considered excessive.
Over the past decade publicly listed companies have been required to report in more detail, how their highest paid executives are being rewarded. This became enshrined in the Corporations Act 2010 in Section 300A which details what declarations are required.
Additionally, while not binding, if 25% or more of ordinary shareholders vote against the remuneration proposed by the Board, then that Board is obliged to reconsider their proposal. If again rejected in the following year, it is suggested that the Board should resign their positions to allow a vote for new candidates to take place. (This is not binding on a Company in Australia however if they ignored the will of the shareholders, then it is likely that investors would leave and the value of the shares would fall.
Task:
Each member of the group is to research the REMUNERATION REPORT for one major publically listed Australian corporation for the sake of ease of completing the summary task described below, your group should focus on companies within the SAME INDUSTRY or having close links.
The INDIVIDUAL components
Each individual group member is to research and write an individual summary report that includes the following:
1. How many executives are listed on the Report. Note executive's remuneration are being studied, NOT board member's remuneration.
2. For the Chief Executive Officer (CEO), what proportion of remuneration is based on:
a. CASH;
b. EQUITY (Options)
c. EQUITY (Shares)
d. Any other listed incentive payment or reward
3. For the Chief Financial Officer (CFO), what proportion of remuneration is based on:
a. CASH;
b. EQUITY (Options)
c. EQUITY (Shares)
d. Any other listed incentive payment or reward
4. Students should compare and contrast the pay/reward structure for these two officers of the company. In particular examine:
a. The mix of payments and rewards (as detailed above); and
b. The size of payments and rewards made.
5. The presentation should take a tabular format (perhaps work the results into a spreadsheet) to enable ease of comparison calculations however this should also be accompanied by a brief summary report of each executive.
The GROUP report requirements
The GROUP should then merge their individual reports into a group report and COMPARE:
a. Each target company's approach;
b. The difference between the make-up of the CEO and CFO remuneration package, in particular the mix between LTI, STI and Cash/Salary components;
c. Discuss which company you feel is producing the best result AND the worst result and/or perhaps incentives which make no real change. Discuss WHY you think this is the case and if it is a reflection of only the CEO's performance or the general state of the markets that company trades. (E.g. Mining companies are struggling to make their forecast profits due to world-wide low commodity prices.)
d. You should complete your analysis and present YOUR CONCLUSIONS in a summary and conclusion section.