Advantage and a disadvantage of the changes proposed

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Question - ABC Ltd is a newly incorporated Australian retail business which listed on the Australian Stock Exchanges (ASX). In meeting the listing requirement for ASX, the firm must establish a corporate governance mechanism which is compliant with the stipulations of ASX for an effective and efficient management of firm resources. This has called for a reassessment of the firm's compensation scheme and other issues in relation to its board members and senior management. The reassessment process resulted in the need to make changes to the compensation scheme devised for board members and senior management. These changes include: 1. A revised bonus plan scheme based on a mixture of an accounting output and market price for senior management 2. A limit on share-based compensation scheme for directors

The recommendations were presented to the board and was eventually approved for implementation in the subsequent reporting period. Based the above premise:

(a) Present a critical analysis of an advantage and a disadvantage of the changes proposed using the positive theory of accounting.

(b) Present a critical analysis of an advantage and a disadvantage of the changes proposed using the normative theory of accounting.

Reference no: EM133017529

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