Reference no: EM13819732

Part 1

‘As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy.

Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning.'

Financial Reporting Council, The UK Corporate Governance Code, September 2014, p.9
https://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance/UK-Corporate-Governance-Code.aspx

‘Suncorp's surprise announcement last month that directors would need to own more than $200,000 of the company's stock is likely to spark a trend as new data reveals directors with "skin in the game" generally outperform - by a lot.'
Adele Ferguson, ‘Report finds companies with directors holding stock had better returns', Sydney Morning Herald, 26 November 2013.
https://www.smh.com.au/action/printArticle?id=4953431

Required

Assume you have been engaged as a corporate governance consultant to a board of directors of a public company listed on the stock exchange. Your assignment is to prepare a report to be submitted to the Chairman of the board explaining and discussing the roles, duties and responsibilities of the company's directors. Your report should contain specific recommendations on the roles of non-executive directors and the management of their relationship with executive directors and shareholders. The Chairman has specifically indicated that she intends to make your report available to shareholders of the company and that the document will be published on the company's web site.

Part 2:

‘Chief executives with multi-million dollar pay packets are not necessarily working in the best interests of shareholders, new research has found, and there may be a case to cap their pay.

A new paper called ‘When Less is More: The Benefits of Limits on Executive Pay', asks whether limits on executive pay cheques harm or benefit shareholders.

The paper by University of Melbourne senior research fellow Dr Peter Cebon and University of California, Berkeley, professor of finance Benjamin Hermalin , suggests that giving CEOs $10 million bonuses encourages them to make short-term decisions rather than work closely with the board and in the best interests of shareholders.'

https://www.australianshareholders.com.au/news/big-ceo-bonuses-encourage-short-term-decisions

‘Cheniere Energy's Charif Souki has emerged as the highest paid US executive in 2013, receiving $US142 million ($153).'

Laura Marcinek, Caleb Melby and Zain Shauk, ‘Top Paid US CEO get $153m, despite company never posting an annual profit', Sydney Morning Herald, 1 May 2014

https://www.smh.com.au/action/printArticle?id=5390138

‘BlackBerry's new interim chief executive John Chen will get $US3million in salary and bonuses, as well as stock valued at about $85million that will vest over the next five years.'

Hugo Miller, ‘New BlackBerry CEO John Chen get $93 million pay package', Sydney Morning Herald, 8 November 2013

https://www.smh.com.au/action/printAticle?id=30003050

Required

Assume you have been employed as a corporate governance consultant by the Australian Institute of Company Directors (AICD). The AICD is concerned that the alleged excessive remuneration paid to CEOs is undermining the perceived quality and reputation of company boards, and further is creating conflict between boards and shareholders. Your assignment is to prepare a report to be submitted to the AICD evaluating the evidence that CEOs and executive remuneration is not aligned with corporate performance. In your report the AICD has asked you to make recommendations for improving the current corporate governance practices relating to setting, reporting and approving CEO and executive remuneration.